Correlation Between Eagle Materials and ECHO INVESTMENT

Can any of the company-specific risk be diversified away by investing in both Eagle Materials and ECHO INVESTMENT 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 ECHO INVESTMENT into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eagle Materials and ECHO INVESTMENT ZY, you can compare the effects of market volatilities on Eagle Materials and ECHO INVESTMENT 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 ECHO INVESTMENT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Materials and ECHO INVESTMENT.

Diversification Opportunities for Eagle Materials and ECHO INVESTMENT

0.82

Correlation Coefficient

Eagle Materials  ECHO INVESTMENT

Very poor diversification

The 3 months correlation between Eagle and ECHO is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Materials and ECHO INVESTMENT ZY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECHO INVESTMENT ZY 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 ECHO INVESTMENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECHO INVESTMENT ZY has no effect on the direction of Eagle Materials i.e., Eagle Materials and ECHO INVESTMENT go up and down completely randomly.

Pair Corralation between Eagle Materials and ECHO INVESTMENT

Assuming the 90 days horizon Eagle Materials is expected to generate 1.33 times less return on investment than ECHO INVESTMENT. But when comparing it to its historical volatility, Eagle Materials is 1.44 times less risky than ECHO INVESTMENT. It trades about 0.09 of its potential returns per unit of risk. ECHO INVESTMENT ZY is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  35.00  in ECHO INVESTMENT ZY on September 2, 2024 and sell it today you would earn a total of  65.00  from holding ECHO INVESTMENT ZY or generate 185.71% 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.  ECHO INVESTMENT ZY

Eagle Materials

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Materials are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Eagle Materials reported solid returns over the last few months and may actually be approaching a breakup point.

ECHO INVESTMENT ZY

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ECHO INVESTMENT ZY are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ECHO INVESTMENT may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Eagle Materials and ECHO INVESTMENT

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

The idea behind Eagle Materials and ECHO INVESTMENT ZY 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 Global Correlations module to find global opportunities by holding instruments from different markets.