Correlation Between Holcim and Eagle Materials
Can any of the company-specific risk be diversified away by investing in both Holcim 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 Holcim and Eagle Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Holcim and Eagle Materials, you can compare the effects of market volatilities on Holcim 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 Holcim with a short position of Eagle Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Holcim and Eagle Materials.
Diversification Opportunities for Holcim and Eagle Materials
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Holcim and Eagle is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Holcim and Eagle Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Materials and Holcim 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 Holcim 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 Holcim i.e., Holcim and Eagle Materials go up and down completely randomly.
Pair Corralation between Holcim and Eagle Materials
Assuming the 90 days horizon Holcim is expected to generate 3.53 times less return on investment than Eagle Materials. But when comparing it to its historical volatility, Holcim is 1.16 times less risky than Eagle Materials. It trades about 0.08 of its potential returns per unit of risk. Eagle Materials is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 28,816 in Eagle Materials on August 26, 2024 and sell it today you would earn a total of 2,619 from holding Eagle Materials or generate 9.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Holcim vs. Eagle Materials
Performance |
| Timeline |
| Holcim |
| Eagle Materials |
Holcim and Eagle Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Holcim and Eagle Materials
The main advantage of trading using opposite Holcim and Eagle Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Holcim 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.| Holcim vs. HeidelbergCement AG ADR | Holcim vs. Anhui Conch Cement | Holcim vs. Buzzi Unicem SpA | Holcim vs. Wienerberger Baustoffindustrie |
| Eagle Materials vs. Vulcan Materials | Eagle Materials vs. CRH PLC ADR | Eagle Materials vs. Summit Materials | Eagle Materials vs. Cemex SAB de |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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