Correlation Between Alcoa Corp and EAGLE

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

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

Diversification Opportunities for Alcoa Corp and EAGLE

-0.45

Correlation Coefficient

Alcoa Corp  EAGLE

Very good diversification

The 3 months correlation between Alcoa and EAGLE is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and EAGLE MATERIALS INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EAGLE MATERIALS INC and Alcoa Corp 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 Alcoa Corp are associated (or correlated) with EAGLE. 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 INC has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and EAGLE go up and down completely randomly.

Pair Corralation between Alcoa Corp and EAGLE

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 6.92 times more return on investment than EAGLE. However, Alcoa Corp is 6.92 times more volatile than EAGLE MATERIALS INC. It trades about 0.12 of its potential returns per unit of risk. EAGLE MATERIALS INC is currently generating about -0.14 per unit of risk. If you would invest  3,244  in Alcoa Corp on September 13, 2024 and sell it today you would earn a total of  710.00  from holding Alcoa Corp or generate 21.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	88.89%
Values	Daily Returns

Alcoa Corp  vs.  EAGLE MATERIALS INC

Alcoa Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Alcoa Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

EAGLE MATERIALS INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EAGLE MATERIALS INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, EAGLE is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alcoa Corp and EAGLE

The main advantage of trading using opposite Alcoa Corp and EAGLE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, EAGLE 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 will offset losses from the drop in EAGLE's long position.

The idea behind Alcoa Corp and EAGLE MATERIALS INC 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.