Correlation Between CRH PLC and Eagle Materials

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

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

Diversification Opportunities for CRH PLC and Eagle Materials

0.14

Correlation Coefficient

CRH PLC  Eagle Materials

Average diversification

The 3 months correlation between CRH and Eagle is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding CRH PLC ADR and Eagle Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Materials and CRH PLC 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 CRH PLC 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 CRH PLC i.e., CRH PLC and Eagle Materials go up and down completely randomly.

Pair Corralation between CRH PLC and Eagle Materials

Considering the 90-day investment horizon CRH PLC ADR is expected to generate 1.23 times more return on investment than Eagle Materials. However, CRH PLC is 1.23 times more volatile than Eagle Materials. It trades about 0.04 of its potential returns per unit of risk. Eagle Materials is currently generating about -0.08 per unit of risk. If you would invest  9,465  in CRH PLC ADR on December 26, 2024 and sell it today you would earn a total of  396.00  from holding CRH PLC ADR or generate 4.18% return on investment over 90 days.

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

CRH PLC ADR  vs.  Eagle Materials

CRH PLC ADR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CRH PLC ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, CRH PLC is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

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. Even with latest unsteady performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with CRH PLC and Eagle Materials

The main advantage of trading using opposite CRH PLC and Eagle Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CRH PLC 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 CRH PLC ADR 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .