Correlation Between EAGLE MATERIALS and Easterly Government

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

By analyzing existing cross correlation between EAGLE MATERIALS and Easterly Government Properties, you can compare the effects of market volatilities on EAGLE MATERIALS and Easterly Government 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 Easterly Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of EAGLE MATERIALS and Easterly Government.

Diversification Opportunities for EAGLE MATERIALS and Easterly Government

0.34

Correlation Coefficient

EAGLE MATERIALS  Easterly Government

Weak diversification

The 3 months correlation between EAGLE and Easterly is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding EAGLE MATERIALS and Easterly Government Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Easterly Government 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 Easterly Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Easterly Government has no effect on the direction of EAGLE MATERIALS i.e., EAGLE MATERIALS and Easterly Government go up and down completely randomly.

Pair Corralation between EAGLE MATERIALS and Easterly Government

Assuming the 90 days trading horizon EAGLE MATERIALS is expected to generate 1.27 times more return on investment than Easterly Government. However, EAGLE MATERIALS is 1.27 times more volatile than Easterly Government Properties. It trades about 0.07 of its potential returns per unit of risk. Easterly Government Properties is currently generating about 0.0 per unit of risk. If you would invest  15,265  in EAGLE MATERIALS on October 3, 2024 and sell it today you would earn a total of  8,535  from holding EAGLE MATERIALS or generate 55.91% return on investment over 90 days.

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

EAGLE MATERIALS  vs.  Easterly Government Properties

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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Easterly Government

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Easterly Government Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Easterly Government is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with EAGLE MATERIALS and Easterly Government

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

The idea behind EAGLE MATERIALS and Easterly Government Properties 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.