Correlation Between Eagle Materials and VULCAN MATERIALS
Can any of the company-specific risk be diversified away by investing in both Eagle Materials and VULCAN 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 Eagle Materials and VULCAN MATERIALS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eagle Materials and VULCAN MATERIALS, you can compare the effects of market volatilities on Eagle Materials and VULCAN 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 Eagle Materials with a short position of VULCAN MATERIALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Materials and VULCAN MATERIALS.
Diversification Opportunities for Eagle Materials and VULCAN MATERIALS
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Eagle and VULCAN is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Materials and VULCAN MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VULCAN MATERIALS 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 VULCAN MATERIALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VULCAN MATERIALS has no effect on the direction of Eagle Materials i.e., Eagle Materials and VULCAN MATERIALS go up and down completely randomly.
Pair Corralation between Eagle Materials and VULCAN MATERIALS
Assuming the 90 days horizon Eagle Materials is expected to generate 1.27 times less return on investment than VULCAN MATERIALS. But when comparing it to its historical volatility, Eagle Materials is 1.33 times less risky than VULCAN MATERIALS. It trades about 0.26 of its potential returns per unit of risk. VULCAN MATERIALS is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 23,756 in VULCAN MATERIALS on August 29, 2024 and sell it today you would earn a total of 3,644 from holding VULCAN MATERIALS or generate 15.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eagle Materials vs. VULCAN MATERIALS
Performance |
| Timeline |
| Eagle Materials |
| VULCAN MATERIALS |
Eagle Materials and VULCAN MATERIALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eagle Materials and VULCAN MATERIALS
The main advantage of trading using opposite Eagle Materials and VULCAN MATERIALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eagle Materials position performs unexpectedly, VULCAN 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 VULCAN MATERIALS will offset losses from the drop in VULCAN MATERIALS's long position.| Eagle Materials vs. Superior Plus Corp | Eagle Materials vs. NMI Holdings | Eagle Materials vs. Origin Agritech | Eagle Materials vs. SIVERS SEMICONDUCTORS AB |
| VULCAN MATERIALS vs. Apple Inc | VULCAN MATERIALS vs. Apple Inc | VULCAN MATERIALS vs. Apple Inc | VULCAN MATERIALS vs. Apple Inc |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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