Correlation Between Eagle Materials and Gladstone Investment

Can any of the company-specific risk be diversified away by investing in both Eagle Materials and Gladstone 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 Gladstone 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 Gladstone Investment, you can compare the effects of market volatilities on Eagle Materials and Gladstone 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 Gladstone Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Materials and Gladstone Investment.

Diversification Opportunities for Eagle Materials and Gladstone Investment

0.58

Correlation Coefficient

Eagle Materials  Gladstone Investment

Very weak diversification

The 3 months correlation between Eagle and Gladstone is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Materials and Gladstone Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gladstone Investment 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 Gladstone Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gladstone Investment has no effect on the direction of Eagle Materials i.e., Eagle Materials and Gladstone Investment go up and down completely randomly.

Pair Corralation between Eagle Materials and Gladstone Investment

Assuming the 90 days horizon Eagle Materials is expected to under-perform the Gladstone Investment. In addition to that, Eagle Materials is 1.4 times more volatile than Gladstone Investment. It trades about -0.4 of its total potential returns per unit of risk. Gladstone Investment is currently generating about -0.08 per unit of volatility. If you would invest  1,286  in Gladstone Investment on September 21, 2024 and sell it today you would lose (27.00) from holding Gladstone Investment or give up 2.1% of portfolio value over 90 days.

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

Eagle Materials  vs.  Gladstone Investment

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. Despite nearly stable basic indicators, Eagle Materials is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Gladstone Investment

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gladstone Investment are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Gladstone Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Eagle Materials and Gladstone Investment

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

The idea behind Eagle Materials and Gladstone Investment 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 Stocks Directory module to find actively traded stocks across global markets.