Correlation Between Hyatt Hotels and Eagle Materials

Can any of the company-specific risk be diversified away by investing in both Hyatt Hotels 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 Hyatt Hotels and Eagle Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hyatt Hotels and Eagle Materials, you can compare the effects of market volatilities on Hyatt Hotels 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 Hyatt Hotels with a short position of Eagle Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyatt Hotels and Eagle Materials.

Diversification Opportunities for Hyatt Hotels and Eagle Materials

0.91

Correlation Coefficient

Hyatt Hotels  Eagle Materials

Almost no diversification

The 3 months correlation between Hyatt and Eagle is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Hyatt Hotels and Eagle Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Materials and Hyatt Hotels 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 Hyatt Hotels 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 Hyatt Hotels i.e., Hyatt Hotels and Eagle Materials go up and down completely randomly.

Pair Corralation between Hyatt Hotels and Eagle Materials

Assuming the 90 days trading horizon Hyatt Hotels is expected to under-perform the Eagle Materials. In addition to that, Hyatt Hotels is 1.36 times more volatile than Eagle Materials. It trades about -0.16 of its total potential returns per unit of risk. Eagle Materials is currently generating about -0.11 per unit of volatility. If you would invest  23,572  in Eagle Materials on December 29, 2024 and sell it today you would lose (2,972) from holding Eagle Materials or give up 12.61% of portfolio value over 90 days.

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

Hyatt Hotels  vs.  Eagle Materials

Hyatt Hotels

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hyatt Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Eagle Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eagle Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Hyatt Hotels and Eagle Materials

The main advantage of trading using opposite Hyatt Hotels and Eagle Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyatt Hotels 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.

The idea behind Hyatt Hotels 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.