Correlation Between Eagle Materials and Brockhaus Capital

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

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

Diversification Opportunities for Eagle Materials and Brockhaus Capital

-0.21

Correlation Coefficient

Eagle Materials  Brockhaus Capital

Very good diversification

The 3 months correlation between Eagle and Brockhaus is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Materials and Brockhaus Capital Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brockhaus Capital 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 Brockhaus Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brockhaus Capital has no effect on the direction of Eagle Materials i.e., Eagle Materials and Brockhaus Capital go up and down completely randomly.

Pair Corralation between Eagle Materials and Brockhaus Capital

Assuming the 90 days horizon Eagle Materials is expected to under-perform the Brockhaus Capital. But the stock apears to be less risky and, when comparing its historical volatility, Eagle Materials is 2.05 times less risky than Brockhaus Capital. The stock trades about -0.72 of its potential returns per unit of risk. The Brockhaus Capital Management is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  2,350  in Brockhaus Capital Management on October 6, 2024 and sell it today you would lose (80.00) from holding Brockhaus Capital Management or give up 3.4% of portfolio value over 90 days.

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

Eagle Materials  vs.  Brockhaus Capital Management

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Brockhaus Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brockhaus Capital Management 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 technical indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Eagle Materials and Brockhaus Capital

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

The idea behind Eagle Materials and Brockhaus Capital Management 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.