Correlation Between Otis Worldwide and EAGLE MATERIALS

Can any of the company-specific risk be diversified away by investing in both Otis Worldwide 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 Otis Worldwide and EAGLE MATERIALS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Otis Worldwide Corp and EAGLE MATERIALS, you can compare the effects of market volatilities on Otis Worldwide 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 Otis Worldwide with a short position of EAGLE MATERIALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Otis Worldwide and EAGLE MATERIALS.

Diversification Opportunities for Otis Worldwide and EAGLE MATERIALS

-0.18

Correlation Coefficient

Otis Worldwide  EAGLE MATERIALS

Good diversification

The 3 months correlation between Otis and EAGLE is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Otis Worldwide Corp and EAGLE MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EAGLE MATERIALS and Otis Worldwide 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 Otis Worldwide Corp 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 Otis Worldwide i.e., Otis Worldwide and EAGLE MATERIALS go up and down completely randomly.

Pair Corralation between Otis Worldwide and EAGLE MATERIALS

Assuming the 90 days horizon Otis Worldwide is expected to generate 2.35 times less return on investment than EAGLE MATERIALS. But when comparing it to its historical volatility, Otis Worldwide Corp is 1.64 times less risky than EAGLE MATERIALS. It trades about 0.05 of its potential returns per unit of risk. EAGLE MATERIALS is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  12,266  in EAGLE MATERIALS on December 4, 2024 and sell it today you would earn a total of  9,134  from holding EAGLE MATERIALS or generate 74.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Otis Worldwide Corp  vs.  EAGLE MATERIALS

Otis Worldwide Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Otis Worldwide Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Otis Worldwide is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the 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. In spite of fragile performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Otis Worldwide and EAGLE MATERIALS

The main advantage of trading using opposite Otis Worldwide and EAGLE MATERIALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Otis Worldwide 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's long position.

The idea behind Otis Worldwide Corp 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.