Correlation Between Xinyi Glass and Eagle Materials

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

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

Diversification Opportunities for Xinyi Glass and Eagle Materials

0.66

Correlation Coefficient

Xinyi Glass  Eagle Materials

Poor diversification

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

Pair Corralation between Xinyi Glass and Eagle Materials

Assuming the 90 days horizon Xinyi Glass Holdings is expected to under-perform the Eagle Materials. But the pink sheet apears to be less risky and, when comparing its historical volatility, Xinyi Glass Holdings is 1.16 times less risky than Eagle Materials. The pink sheet trades about -0.14 of its potential returns per unit of risk. The Eagle Materials is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  28,546  in Eagle Materials on September 1, 2024 and sell it today you would earn a total of  2,346  from holding Eagle Materials or generate 8.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Xinyi Glass Holdings  vs.  Eagle Materials

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 fragile technical and fundamental indicators, Xinyi Glass reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Xinyi Glass and Eagle Materials

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

The idea behind Xinyi Glass Holdings and Eagle Materials 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.