Correlation Between ADHI KARYA and EAGLE MATERIALS

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

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

Diversification Opportunities for ADHI KARYA and EAGLE MATERIALS

0.35

Correlation Coefficient

ADHI KARYA  EAGLE MATERIALS

Weak diversification

The 3 months correlation between ADHI and EAGLE is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding ADHI KARYA and EAGLE MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EAGLE MATERIALS and ADHI KARYA 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 ADHI KARYA 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 ADHI KARYA i.e., ADHI KARYA and EAGLE MATERIALS go up and down completely randomly.

Pair Corralation between ADHI KARYA and EAGLE MATERIALS

Assuming the 90 days trading horizon ADHI KARYA is expected to generate 5.06 times more return on investment than EAGLE MATERIALS. However, ADHI KARYA is 5.06 times more volatile than EAGLE MATERIALS. It trades about -0.04 of its potential returns per unit of risk. EAGLE MATERIALS is currently generating about -0.73 per unit of risk. If you would invest  1.90  in ADHI KARYA on October 9, 2024 and sell it today you would lose (0.15) from holding ADHI KARYA or give up 7.89% of portfolio value over 90 days.

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

ADHI KARYA  vs.  EAGLE MATERIALS

ADHI KARYA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ADHI KARYA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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 latest unsteady performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with ADHI KARYA and EAGLE MATERIALS

The main advantage of trading using opposite ADHI KARYA and EAGLE MATERIALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ADHI KARYA 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 ADHI KARYA 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.