Correlation Between EAGLE MATERIALS and Applied Materials
Can any of the company-specific risk be diversified away by investing in both EAGLE MATERIALS and Applied Materials 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 Applied Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EAGLE MATERIALS and Applied Materials, you can compare the effects of market volatilities on EAGLE MATERIALS and Applied Materials 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 Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of EAGLE MATERIALS and Applied Materials.
Diversification Opportunities for EAGLE MATERIALS and Applied Materials
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between EAGLE and Applied is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding EAGLE MATERIALS and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials 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 Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of EAGLE MATERIALS i.e., EAGLE MATERIALS and Applied Materials go up and down completely randomly.
Pair Corralation between EAGLE MATERIALS and Applied Materials
Assuming the 90 days trading horizon EAGLE MATERIALS is expected to under-perform the Applied Materials. But the stock apears to be less risky and, when comparing its historical volatility, EAGLE MATERIALS is 1.59 times less risky than Applied Materials. The stock trades about -0.26 of its potential returns per unit of risk. The Applied Materials is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 17,370 in Applied Materials on December 2, 2024 and sell it today you would lose (2,370) from holding Applied Materials or give up 13.64% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
EAGLE MATERIALS vs. Applied Materials
Performance |
Timeline |
EAGLE MATERIALS |
Applied Materials |
EAGLE MATERIALS and Applied Materials Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with EAGLE MATERIALS and Applied Materials
The main advantage of trading using opposite EAGLE MATERIALS and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EAGLE MATERIALS position performs unexpectedly, Applied Materials 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 Applied Materials will offset losses from the drop in Applied Materials' long position.EAGLE MATERIALS vs. CENTURIA OFFICE REIT | EAGLE MATERIALS vs. Constellation Software | EAGLE MATERIALS vs. CITY OFFICE REIT | EAGLE MATERIALS vs. Sqs Software Quality |
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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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