Correlation Between EAGLE MATERIALS and SYLVANIA PLAT

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

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

Diversification Opportunities for EAGLE MATERIALS and SYLVANIA PLAT

0.61

Correlation Coefficient

EAGLE MATERIALS  SYLVANIA PLAT

Poor diversification

The 3 months correlation between EAGLE and SYLVANIA is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding EAGLE MATERIALS and SYLVANIA PLAT DL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SYLVANIA PLAT DL and EAGLE MATERIALS 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 EAGLE MATERIALS are associated (or correlated) with SYLVANIA PLAT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SYLVANIA PLAT DL has no effect on the direction of EAGLE MATERIALS i.e., EAGLE MATERIALS and SYLVANIA PLAT go up and down completely randomly.

Pair Corralation between EAGLE MATERIALS and SYLVANIA PLAT

Assuming the 90 days trading horizon EAGLE MATERIALS is expected to generate 0.46 times more return on investment than SYLVANIA PLAT. However, EAGLE MATERIALS is 2.15 times less risky than SYLVANIA PLAT. It trades about 0.08 of its potential returns per unit of risk. SYLVANIA PLAT DL is currently generating about -0.02 per unit of risk. If you would invest  13,256  in EAGLE MATERIALS on October 22, 2024 and sell it today you would earn a total of  11,744  from holding EAGLE MATERIALS or generate 88.59% return on investment over 90 days.

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

EAGLE MATERIALS  vs.  SYLVANIA PLAT DL

EAGLE MATERIALS

Risk-Adjusted Performance

0 of 100

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 rather sound primary indicators, EAGLE MATERIALS is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

SYLVANIA PLAT DL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SYLVANIA PLAT DL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain 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 EAGLE MATERIALS and SYLVANIA PLAT

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

The idea behind EAGLE MATERIALS and SYLVANIA PLAT DL 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.