Correlation Between Eagle Materials and Sandfire Resources

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

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

Diversification Opportunities for Eagle Materials and Sandfire Resources

0.26

Correlation Coefficient

Eagle Materials  Sandfire Resources

Modest diversification

The 3 months correlation between Eagle and Sandfire is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Materials and Sandfire Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandfire Resources 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 Sandfire Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandfire Resources has no effect on the direction of Eagle Materials i.e., Eagle Materials and Sandfire Resources go up and down completely randomly.

Pair Corralation between Eagle Materials and Sandfire Resources

Assuming the 90 days horizon Eagle Materials is expected to under-perform the Sandfire Resources. But the stock apears to be less risky and, when comparing its historical volatility, Eagle Materials is 1.62 times less risky than Sandfire Resources. The stock trades about -0.67 of its potential returns per unit of risk. The Sandfire Resources Limited is currently generating about -0.29 of returns per unit of risk over similar time horizon. If you would invest  630.00  in Sandfire Resources Limited on September 22, 2024 and sell it today you would lose (85.00) from holding Sandfire Resources Limited or give up 13.49% of portfolio value over 90 days.

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

Eagle Materials  vs.  Sandfire Resources 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. Despite nearly stable basic indicators, Eagle Materials is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Sandfire Resources

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with Eagle Materials and Sandfire Resources

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

The idea behind Eagle Materials and Sandfire Resources 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.