Correlation Between Eagle Materials and Take-Two Interactive

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

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

Diversification Opportunities for Eagle Materials and Take-Two Interactive

-0.39

Correlation Coefficient

Eagle Materials  Take-Two Interactive

Very good diversification

The 3 months correlation between Eagle and Take-Two is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Materials and Take Two Interactive Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Take Two Interactive 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 Take-Two Interactive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Take Two Interactive has no effect on the direction of Eagle Materials i.e., Eagle Materials and Take-Two Interactive go up and down completely randomly.

Pair Corralation between Eagle Materials and Take-Two Interactive

Assuming the 90 days horizon Eagle Materials is expected to under-perform the Take-Two Interactive. But the stock apears to be less risky and, when comparing its historical volatility, Eagle Materials is 1.37 times less risky than Take-Two Interactive. The stock trades about -0.13 of its potential returns per unit of risk. The Take Two Interactive Software is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  17,722  in Take Two Interactive Software on December 29, 2024 and sell it today you would earn a total of  2,008  from holding Take Two Interactive Software or generate 11.33% return on investment over 90 days.

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

Eagle Materials  vs.  Take Two Interactive Software

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.

Take Two Interactive

Risk-Adjusted Performance

Modest

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

Pair Trading with Eagle Materials and Take-Two Interactive

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

The idea behind Eagle Materials and Take Two Interactive Software 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.