Correlation Between EAGLE MATERIALS and Tokyo Gas

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

By analyzing existing cross correlation between EAGLE MATERIALS and Tokyo Gas CoLtd, you can compare the effects of market volatilities on EAGLE MATERIALS and Tokyo Gas 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 Tokyo Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of EAGLE MATERIALS and Tokyo Gas.

Diversification Opportunities for EAGLE MATERIALS and Tokyo Gas

0.55

Correlation Coefficient

EAGLE MATERIALS  Tokyo Gas

Very weak diversification

The 3 months correlation between EAGLE and Tokyo is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding EAGLE MATERIALS and Tokyo Gas CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokyo Gas CoLtd 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 Tokyo Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokyo Gas CoLtd has no effect on the direction of EAGLE MATERIALS i.e., EAGLE MATERIALS and Tokyo Gas go up and down completely randomly.

Pair Corralation between EAGLE MATERIALS and Tokyo Gas

Assuming the 90 days trading horizon EAGLE MATERIALS is expected to generate 3.21 times less return on investment than Tokyo Gas. But when comparing it to its historical volatility, EAGLE MATERIALS is 1.27 times less risky than Tokyo Gas. It trades about 0.08 of its potential returns per unit of risk. Tokyo Gas CoLtd is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,100  in Tokyo Gas CoLtd on September 13, 2024 and sell it today you would earn a total of  660.00  from holding Tokyo Gas CoLtd or generate 31.43% return on investment over 90 days.

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

EAGLE MATERIALS  vs.  Tokyo Gas CoLtd

EAGLE MATERIALS

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EAGLE MATERIALS are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain primary indicators, EAGLE MATERIALS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Tokyo Gas CoLtd

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with EAGLE MATERIALS and Tokyo Gas

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

The idea behind EAGLE MATERIALS and Tokyo Gas CoLtd 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.