Correlation Between EAGLE MATERIALS and SLR Investment

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

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

Diversification Opportunities for EAGLE MATERIALS and SLR Investment

-0.66

Correlation Coefficient

EAGLE MATERIALS  SLR Investment

Excellent diversification

The 3 months correlation between EAGLE and SLR is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding EAGLE MATERIALS and SLR Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SLR Investment Corp 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 SLR Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SLR Investment Corp has no effect on the direction of EAGLE MATERIALS i.e., EAGLE MATERIALS and SLR Investment go up and down completely randomly.

Pair Corralation between EAGLE MATERIALS and SLR Investment

Assuming the 90 days trading horizon EAGLE MATERIALS is expected to generate 1.73 times more return on investment than SLR Investment. However, EAGLE MATERIALS is 1.73 times more volatile than SLR Investment Corp. It trades about 0.07 of its potential returns per unit of risk. SLR Investment Corp is currently generating about 0.08 per unit of risk. If you would invest  12,365  in EAGLE MATERIALS on December 1, 2024 and sell it today you would earn a total of  9,235  from holding EAGLE MATERIALS or generate 74.69% return on investment over 90 days.

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

EAGLE MATERIALS  vs.  SLR Investment Corp

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. In spite of fragile performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

SLR Investment Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SLR Investment Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SLR Investment may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with EAGLE MATERIALS and SLR Investment

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

The idea behind EAGLE MATERIALS and SLR Investment Corp 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.