Correlation Between CLOVER HEALTH and Eagle Materials

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

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

Diversification Opportunities for CLOVER HEALTH and Eagle Materials

0.53

Correlation Coefficient

CLOVER HEALTH  Eagle Materials

Very weak diversification

The 3 months correlation between CLOVER and Eagle is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding CLOVER HEALTH INV and Eagle Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Materials and CLOVER HEALTH 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 CLOVER HEALTH INV 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 CLOVER HEALTH i.e., CLOVER HEALTH and Eagle Materials go up and down completely randomly.

Pair Corralation between CLOVER HEALTH and Eagle Materials

Assuming the 90 days horizon CLOVER HEALTH INV is expected to generate 2.66 times more return on investment than Eagle Materials. However, CLOVER HEALTH is 2.66 times more volatile than Eagle Materials. It trades about 0.06 of its potential returns per unit of risk. Eagle Materials is currently generating about -0.19 per unit of risk. If you would invest  298.00  in CLOVER HEALTH INV on December 20, 2024 and sell it today you would earn a total of  29.00  from holding CLOVER HEALTH INV or generate 9.73% return on investment over 90 days.

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

CLOVER HEALTH INV  vs.  Eagle Materials

CLOVER HEALTH INV

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CLOVER HEALTH INV are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CLOVER HEALTH reported solid returns over the last few months and may actually be approaching a breakup point.

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 weak 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.

Pair Trading with CLOVER HEALTH and Eagle Materials

The main advantage of trading using opposite CLOVER HEALTH and Eagle Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CLOVER HEALTH 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 CLOVER HEALTH INV 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.