Correlation Between EAGLE MATERIALS and HP
Can any of the company-specific risk be diversified away by investing in both EAGLE MATERIALS and HP at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining EAGLE MATERIALS and HP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EAGLE MATERIALS and HP Inc, you can compare the effects of market volatilities on EAGLE MATERIALS and HP and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in EAGLE MATERIALS with a short position of HP. Check out your portfolio center. Please also check ongoing floating volatility patterns of EAGLE MATERIALS and HP.
Diversification Opportunities for EAGLE MATERIALS and HP
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between EAGLE and HP is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding EAGLE MATERIALS and HP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HP Inc and EAGLE MATERIALS is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on EAGLE MATERIALS are associated (or correlated) with HP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HP Inc has no effect on the direction of EAGLE MATERIALS i.e., EAGLE MATERIALS and HP go up and down completely randomly.
Pair Corralation between EAGLE MATERIALS and HP
Assuming the 90 days trading horizon EAGLE MATERIALS is expected to generate 1.07 times more return on investment than HP. However, EAGLE MATERIALS is 1.07 times more volatile than HP Inc. It trades about 0.07 of its potential returns per unit of risk. HP Inc is currently generating about 0.01 per unit of risk. If you would invest 19,961 in EAGLE MATERIALS on September 27, 2024 and sell it today you would earn a total of 4,039 from holding EAGLE MATERIALS or generate 20.23% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
EAGLE MATERIALS vs. HP Inc
Performance |
Timeline |
EAGLE MATERIALS |
HP Inc |
EAGLE MATERIALS and HP Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with EAGLE MATERIALS and HP
The main advantage of trading using opposite EAGLE MATERIALS and HP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EAGLE MATERIALS position performs unexpectedly, HP can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in HP will offset losses from the drop in HP's long position.EAGLE MATERIALS vs. Renesas Electronics | EAGLE MATERIALS vs. Cass Information Systems | EAGLE MATERIALS vs. STORE ELECTRONIC | EAGLE MATERIALS vs. TT Electronics PLC |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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