Correlation Between Lafargeholcim and Eagle Materials
Can any of the company-specific risk be diversified away by investing in both Lafargeholcim 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 Lafargeholcim and Eagle Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lafargeholcim Ltd ADR and Eagle Materials, you can compare the effects of market volatilities on Lafargeholcim 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 Lafargeholcim with a short position of Eagle Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lafargeholcim and Eagle Materials.
Diversification Opportunities for Lafargeholcim and Eagle Materials
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lafargeholcim and Eagle is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Lafargeholcim Ltd ADR and Eagle Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Materials and Lafargeholcim 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 Lafargeholcim Ltd ADR 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 Lafargeholcim i.e., Lafargeholcim and Eagle Materials go up and down completely randomly.
Pair Corralation between Lafargeholcim and Eagle Materials
Assuming the 90 days horizon Lafargeholcim is expected to generate 1.2 times less return on investment than Eagle Materials. But when comparing it to its historical volatility, Lafargeholcim Ltd ADR is 1.47 times less risky than Eagle Materials. It trades about 0.13 of its potential returns per unit of risk. Eagle Materials is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 13,698 in Eagle Materials on August 26, 2024 and sell it today you would earn a total of 17,737 from holding Eagle Materials or generate 129.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lafargeholcim Ltd ADR vs. Eagle Materials
Performance |
| Timeline |
| Lafargeholcim ADR |
| Eagle Materials |
Lafargeholcim and Eagle Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lafargeholcim and Eagle Materials
The main advantage of trading using opposite Lafargeholcim and Eagle Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lafargeholcim 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.| Lafargeholcim vs. Anhui Conch Cement | Lafargeholcim vs. Buzzi Unicem SpA | Lafargeholcim vs. Wienerberger Baustoffindustrie | Lafargeholcim vs. China National Building |
| 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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