Correlation Between Eagle Materials and Summit Materials
Can any of the company-specific risk be diversified away by investing in both Eagle Materials and Summit 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 Summit 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 Summit Materials, you can compare the effects of market volatilities on Eagle Materials and Summit 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 Summit Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Materials and Summit Materials.
Diversification Opportunities for Eagle Materials and Summit Materials
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Eagle and Summit is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Materials and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit 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 Summit Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Materials has no effect on the direction of Eagle Materials i.e., Eagle Materials and Summit Materials go up and down completely randomly.
Pair Corralation between Eagle Materials and Summit Materials
Considering the 90-day investment horizon Eagle Materials is expected to generate 1.13 times less return on investment than Summit Materials. But when comparing it to its historical volatility, Eagle Materials is 1.05 times less risky than Summit Materials. It trades about 0.11 of its potential returns per unit of risk. Summit Materials is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 3,880 in Summit Materials on August 23, 2024 and sell it today you would earn a total of 1,330 from holding Summit Materials or generate 34.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eagle Materials vs. Summit Materials
Performance |
| Timeline |
| Eagle Materials |
| Summit Materials |
Eagle Materials and Summit Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eagle Materials and Summit Materials
The main advantage of trading using opposite Eagle Materials and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eagle Materials position performs unexpectedly, Summit 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 Summit Materials will offset losses from the drop in Summit Materials' long position.| Eagle Materials vs. Vulcan Materials | Eagle Materials vs. CRH PLC ADR | Eagle Materials vs. Summit Materials | Eagle Materials vs. Cemex SAB de |
| Summit Materials vs. Martin Marietta Materials | Summit Materials vs. Vulcan Materials | Summit Materials vs. United States Lime | Summit Materials vs. James Hardie Industries |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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