Correlation Between EAGLE MATERIALS and Nemetschek

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

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

Diversification Opportunities for EAGLE MATERIALS and Nemetschek

0.68

Correlation Coefficient

EAGLE MATERIALS  Nemetschek

Poor diversification

The 3 months correlation between EAGLE and Nemetschek is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding EAGLE MATERIALS and Nemetschek AG ON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nemetschek AG ON 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 Nemetschek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nemetschek AG ON has no effect on the direction of EAGLE MATERIALS i.e., EAGLE MATERIALS and Nemetschek go up and down completely randomly.

Pair Corralation between EAGLE MATERIALS and Nemetschek

Assuming the 90 days trading horizon EAGLE MATERIALS is expected to generate 1.01 times less return on investment than Nemetschek. But when comparing it to its historical volatility, EAGLE MATERIALS is 1.11 times less risky than Nemetschek. It trades about 0.07 of its potential returns per unit of risk. Nemetschek AG ON is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  5,284  in Nemetschek AG ON on October 5, 2024 and sell it today you would earn a total of  4,176  from holding Nemetschek AG ON or generate 79.03% 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.  Nemetschek AG ON

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 latest uncertain performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Nemetschek AG ON

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Nemetschek AG ON has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Nemetschek is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with EAGLE MATERIALS and Nemetschek

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

The idea behind EAGLE MATERIALS and Nemetschek AG ON 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.