Correlation Between EAGLE MATERIALS and NISSAN CHEMICAL

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

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

Diversification Opportunities for EAGLE MATERIALS and NISSAN CHEMICAL

0.76

Correlation Coefficient

EAGLE MATERIALS  NISSAN CHEMICAL

Poor diversification

The 3 months correlation between EAGLE and NISSAN is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding EAGLE MATERIALS and NISSAN CHEMICAL IND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NISSAN CHEMICAL IND 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 NISSAN CHEMICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NISSAN CHEMICAL IND has no effect on the direction of EAGLE MATERIALS i.e., EAGLE MATERIALS and NISSAN CHEMICAL go up and down completely randomly.

Pair Corralation between EAGLE MATERIALS and NISSAN CHEMICAL

Assuming the 90 days trading horizon EAGLE MATERIALS is expected to generate 1.64 times more return on investment than NISSAN CHEMICAL. However, EAGLE MATERIALS is 1.64 times more volatile than NISSAN CHEMICAL IND. It trades about -0.05 of its potential returns per unit of risk. NISSAN CHEMICAL IND is currently generating about -0.08 per unit of risk. If you would invest  25,575  in EAGLE MATERIALS on September 29, 2024 and sell it today you would lose (1,775) from holding EAGLE MATERIALS or give up 6.94% of portfolio value over 90 days.

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

EAGLE MATERIALS  vs.  NISSAN CHEMICAL IND

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 rather sound primary indicators, EAGLE MATERIALS is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

NISSAN CHEMICAL IND

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NISSAN CHEMICAL IND has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, NISSAN CHEMICAL is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with EAGLE MATERIALS and NISSAN CHEMICAL

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

The idea behind EAGLE MATERIALS and NISSAN CHEMICAL IND 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.