Correlation Between Eagle Materials and Inwido AB

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

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

Diversification Opportunities for Eagle Materials and Inwido AB

-0.21

Correlation Coefficient

Eagle Materials  Inwido AB

Very good diversification

The 3 months correlation between Eagle and Inwido is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Materials and Inwido AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inwido AB 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 Inwido AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inwido AB has no effect on the direction of Eagle Materials i.e., Eagle Materials and Inwido AB go up and down completely randomly.

Pair Corralation between Eagle Materials and Inwido AB

Assuming the 90 days horizon Eagle Materials is expected to under-perform the Inwido AB. In addition to that, Eagle Materials is 1.01 times more volatile than Inwido AB. It trades about -0.07 of its total potential returns per unit of risk. Inwido AB is currently generating about -0.04 per unit of volatility. If you would invest  1,648  in Inwido AB on September 30, 2024 and sell it today you would lose (83.00) from holding Inwido AB or give up 5.04% 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.  Inwido AB

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. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Inwido AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inwido AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Inwido AB is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Eagle Materials and Inwido AB

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

The idea behind Eagle Materials and Inwido AB 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.