Correlation Between Eagle Materials and Penta Ocean

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

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

Diversification Opportunities for Eagle Materials and Penta Ocean

-0.39

Correlation Coefficient

Eagle Materials  Penta Ocean

Very good diversification

The 3 months correlation between Eagle and Penta is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Materials and Penta Ocean Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penta Ocean Construc 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 Penta Ocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penta Ocean Construc has no effect on the direction of Eagle Materials i.e., Eagle Materials and Penta Ocean go up and down completely randomly.

Pair Corralation between Eagle Materials and Penta Ocean

Assuming the 90 days horizon Eagle Materials is expected to under-perform the Penta Ocean. In addition to that, Eagle Materials is 1.3 times more volatile than Penta Ocean Construction Co. It trades about -0.05 of its total potential returns per unit of risk. Penta Ocean Construction Co is currently generating about 0.0 per unit of volatility. If you would invest  380.00  in Penta Ocean Construction Co on September 24, 2024 and sell it today you would lose (2.00) from holding Penta Ocean Construction Co or give up 0.53% of portfolio value over 90 days.

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

Eagle Materials  vs.  Penta Ocean Construction 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.

Penta Ocean Construc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Eagle Materials and Penta Ocean

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

The idea behind Eagle Materials and Penta Ocean Construction 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.