Correlation Between Eagle Materials and Snam SpA

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

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

Diversification Opportunities for Eagle Materials and Snam SpA

-0.58

Correlation Coefficient

Eagle Materials  Snam SpA

Excellent diversification

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

Pair Corralation between Eagle Materials and Snam SpA

Assuming the 90 days horizon Eagle Materials is expected to under-perform the Snam SpA. In addition to that, Eagle Materials is 1.28 times more volatile than Snam SpA. It trades about -0.21 of its total potential returns per unit of risk. Snam SpA is currently generating about 0.17 per unit of volatility. If you would invest  409.00  in Snam SpA on December 19, 2024 and sell it today you would earn a total of  53.00  from holding Snam SpA or generate 12.96% return on investment over 90 days.

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

Eagle Materials  vs.  Snam SpA

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.

Snam SpA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Snam SpA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Snam SpA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eagle Materials and Snam SpA

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

The idea behind Eagle Materials and Snam SpA 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.