Correlation Between Eagle Materials and Fast Retailing

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

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

Diversification Opportunities for Eagle Materials and Fast Retailing

0.11

Correlation Coefficient

Eagle Materials  Fast Retailing

Average diversification

The 3 months correlation between Eagle and Fast is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Materials and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing 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 Fast Retailing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fast Retailing has no effect on the direction of Eagle Materials i.e., Eagle Materials and Fast Retailing go up and down completely randomly.

Pair Corralation between Eagle Materials and Fast Retailing

Assuming the 90 days horizon Eagle Materials is expected to under-perform the Fast Retailing. But the stock apears to be less risky and, when comparing its historical volatility, Eagle Materials is 1.33 times less risky than Fast Retailing. The stock trades about -0.67 of its potential returns per unit of risk. The Fast Retailing Co is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  29,410  in Fast Retailing Co on September 22, 2024 and sell it today you would earn a total of  2,730  from holding Fast Retailing Co or generate 9.28% return on investment over 90 days.

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

Eagle Materials  vs.  Fast Retailing Co

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.

Fast Retailing

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fast Retailing Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Fast Retailing may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Eagle Materials and Fast Retailing

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

The idea behind Eagle Materials and Fast Retailing Co 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.