Correlation Between Eagle Materials and ON SEMICONDUCTOR

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

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

Diversification Opportunities for Eagle Materials and ON SEMICONDUCTOR

0.27

Correlation Coefficient

Eagle Materials  ON SEMICONDUCTOR

Modest diversification

The 3 months correlation between Eagle and XS4 is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Materials and ON SEMICONDUCTOR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ON SEMICONDUCTOR 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 ON SEMICONDUCTOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ON SEMICONDUCTOR has no effect on the direction of Eagle Materials i.e., Eagle Materials and ON SEMICONDUCTOR go up and down completely randomly.

Pair Corralation between Eagle Materials and ON SEMICONDUCTOR

Assuming the 90 days horizon Eagle Materials is expected to under-perform the ON SEMICONDUCTOR. But the stock apears to be less risky and, when comparing its historical volatility, Eagle Materials is 1.24 times less risky than ON SEMICONDUCTOR. The stock trades about -0.04 of its potential returns per unit of risk. The ON SEMICONDUCTOR is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  6,283  in ON SEMICONDUCTOR on September 22, 2024 and sell it today you would earn a total of  48.00  from holding ON SEMICONDUCTOR or generate 0.76% return on investment over 90 days.

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

Eagle Materials  vs.  ON SEMICONDUCTOR

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.

ON SEMICONDUCTOR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ON SEMICONDUCTOR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, ON SEMICONDUCTOR is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Eagle Materials and ON SEMICONDUCTOR

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

The idea behind Eagle Materials and ON SEMICONDUCTOR 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.