Correlation Between Zhejiang Expressway and EAGLE MATERIALS

Can any of the company-specific risk be diversified away by investing in both Zhejiang Expressway 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 Zhejiang Expressway and EAGLE MATERIALS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zhejiang Expressway Co and EAGLE MATERIALS, you can compare the effects of market volatilities on Zhejiang Expressway 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 Zhejiang Expressway with a short position of EAGLE MATERIALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhejiang Expressway and EAGLE MATERIALS.

Diversification Opportunities for Zhejiang Expressway and EAGLE MATERIALS

0.38

Correlation Coefficient

Zhejiang Expressway  EAGLE MATERIALS

Weak diversification

The 3 months correlation between Zhejiang and EAGLE is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Expressway Co and EAGLE MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EAGLE MATERIALS and Zhejiang Expressway 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 Zhejiang Expressway Co 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 Zhejiang Expressway i.e., Zhejiang Expressway and EAGLE MATERIALS go up and down completely randomly.

Pair Corralation between Zhejiang Expressway and EAGLE MATERIALS

Assuming the 90 days horizon Zhejiang Expressway Co is expected to generate 0.81 times more return on investment than EAGLE MATERIALS. However, Zhejiang Expressway Co is 1.23 times less risky than EAGLE MATERIALS. It trades about 0.06 of its potential returns per unit of risk. EAGLE MATERIALS is currently generating about -0.28 per unit of risk. If you would invest  62.00  in Zhejiang Expressway Co on September 13, 2024 and sell it today you would earn a total of  1.00  from holding Zhejiang Expressway Co or generate 1.61% return on investment over 90 days.

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

Zhejiang Expressway Co  vs.  EAGLE MATERIALS

Zhejiang Expressway

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Expressway Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Zhejiang Expressway reported solid returns over the last few months and may actually be approaching a breakup point.

EAGLE MATERIALS

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EAGLE MATERIALS are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain primary indicators, EAGLE MATERIALS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Zhejiang Expressway and EAGLE MATERIALS

The main advantage of trading using opposite Zhejiang Expressway and EAGLE MATERIALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhejiang Expressway 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's long position.

The idea behind Zhejiang Expressway Co 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.