Correlation Between EAGLE MATERIALS and BHP Group

Can any of the company-specific risk be diversified away by investing in both EAGLE MATERIALS and BHP Group 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 BHP Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between EAGLE MATERIALS and BHP Group Limited, you can compare the effects of market volatilities on EAGLE MATERIALS and BHP Group 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 BHP Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of EAGLE MATERIALS and BHP Group.

Diversification Opportunities for EAGLE MATERIALS and BHP Group

-0.14

Correlation Coefficient

EAGLE MATERIALS  BHP Group

Good diversification

The 3 months correlation between EAGLE and BHP is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding EAGLE MATERIALS and BHP Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHP Group Limited 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 BHP Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BHP Group Limited has no effect on the direction of EAGLE MATERIALS i.e., EAGLE MATERIALS and BHP Group go up and down completely randomly.

Pair Corralation between EAGLE MATERIALS and BHP Group

Assuming the 90 days trading horizon EAGLE MATERIALS is expected to under-perform the BHP Group. But the stock apears to be less risky and, when comparing its historical volatility, EAGLE MATERIALS is 1.15 times less risky than BHP Group. The stock trades about -0.8 of its potential returns per unit of risk. The BHP Group Limited is currently generating about -0.27 of returns per unit of risk over similar time horizon. If you would invest  2,530  in BHP Group Limited on October 4, 2024 and sell it today you would lose (175.00) from holding BHP Group Limited or give up 6.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

EAGLE MATERIALS  vs.  BHP Group Limited

EAGLE MATERIALS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EAGLE MATERIALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

BHP Group Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BHP Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with EAGLE MATERIALS and BHP Group

The main advantage of trading using opposite EAGLE MATERIALS and BHP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EAGLE MATERIALS position performs unexpectedly, BHP Group 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 BHP Group will offset losses from the drop in BHP Group's long position.

The idea behind EAGLE MATERIALS and BHP Group Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.