Correlation Between Eagle Materials and Xinyi Glass

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

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

Diversification Opportunities for Eagle Materials and Xinyi Glass

0.66

Correlation Coefficient

Eagle Materials  Xinyi Glass

Poor diversification

The 3 months correlation between Eagle and Xinyi is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Materials and Xinyi Glass Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinyi Glass Holdings 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 Xinyi Glass. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinyi Glass Holdings has no effect on the direction of Eagle Materials i.e., Eagle Materials and Xinyi Glass go up and down completely randomly.

Pair Corralation between Eagle Materials and Xinyi Glass

Considering the 90-day investment horizon Eagle Materials is expected to generate 0.33 times more return on investment than Xinyi Glass. However, Eagle Materials is 3.01 times less risky than Xinyi Glass. It trades about 0.23 of its potential returns per unit of risk. Xinyi Glass Holdings is currently generating about 0.07 per unit of risk. If you would invest  24,449  in Eagle Materials on September 3, 2024 and sell it today you would earn a total of  6,443  from holding Eagle Materials or generate 26.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Eagle Materials  vs.  Xinyi Glass Holdings

Eagle Materials

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Materials are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Eagle Materials reported solid returns over the last few months and may actually be approaching a breakup point.

Xinyi Glass Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Xinyi Glass Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, Xinyi Glass reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eagle Materials and Xinyi Glass

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

The idea behind Eagle Materials and Xinyi Glass Holdings 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.

Check out your portfolio center.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.