Correlation Between Eagle Materials and Aqua America

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

By analyzing existing cross correlation between Eagle Materials and Aqua America, you can compare the effects of market volatilities on Eagle Materials and Aqua America 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 Aqua America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Materials and Aqua America.

Diversification Opportunities for Eagle Materials and Aqua America

-0.83

Correlation Coefficient

Eagle Materials  Aqua America

Pay attention - limited upside

The 3 months correlation between Eagle and Aqua is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Materials and Aqua America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqua America 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 Aqua America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqua America has no effect on the direction of Eagle Materials i.e., Eagle Materials and Aqua America go up and down completely randomly.

Pair Corralation between Eagle Materials and Aqua America

Assuming the 90 days horizon Eagle Materials is expected to under-perform the Aqua America. But the stock apears to be less risky and, when comparing its historical volatility, Eagle Materials is 1.14 times less risky than Aqua America. The stock trades about -0.19 of its potential returns per unit of risk. The Aqua America is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,438  in Aqua America on December 20, 2024 and sell it today you would earn a total of  168.00  from holding Aqua America or generate 4.89% return on investment over 90 days.

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

Eagle Materials  vs.  Aqua America

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. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Aqua America

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aqua America are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Aqua America is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Eagle Materials and Aqua America

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

The idea behind Eagle Materials and Aqua America 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.