Correlation Between Highlight Communications and EAGLE MATERIALS

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

By analyzing existing cross correlation between Highlight Communications AG and EAGLE MATERIALS, you can compare the effects of market volatilities on Highlight Communications and EAGLE MATERIALS 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 Highlight Communications with a short position of EAGLE MATERIALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highlight Communications and EAGLE MATERIALS.

Diversification Opportunities for Highlight Communications and EAGLE MATERIALS

0.04

Correlation Coefficient

Highlight Communications  EAGLE MATERIALS

Significant diversification

The 3 months correlation between Highlight and EAGLE is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Highlight Communications AG and EAGLE MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EAGLE MATERIALS and Highlight Communications 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 Highlight Communications AG are associated (or correlated) with EAGLE MATERIALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EAGLE MATERIALS has no effect on the direction of Highlight Communications i.e., Highlight Communications and EAGLE MATERIALS go up and down completely randomly.

Pair Corralation between Highlight Communications and EAGLE MATERIALS

Assuming the 90 days trading horizon Highlight Communications AG is expected to generate 1.57 times more return on investment than EAGLE MATERIALS. However, Highlight Communications is 1.57 times more volatile than EAGLE MATERIALS. It trades about 0.01 of its potential returns per unit of risk. EAGLE MATERIALS is currently generating about -0.04 per unit of risk. If you would invest  113.00  in Highlight Communications AG on September 25, 2024 and sell it today you would lose (2.00) from holding Highlight Communications AG or give up 1.77% of portfolio value over 90 days.

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

Highlight Communications AG  vs.  EAGLE MATERIALS

Highlight Communications

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Highlight Communications and EAGLE MATERIALS

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

The idea behind Highlight Communications AG and EAGLE MATERIALS 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.