Correlation Between Eagle Materials and THRACE PLASTICS

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

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

Diversification Opportunities for Eagle Materials and THRACE PLASTICS

0.26

Correlation Coefficient

Eagle Materials  THRACE PLASTICS

Modest diversification

The 3 months correlation between Eagle and THRACE is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Materials and THRACE PLASTICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THRACE PLASTICS 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 THRACE PLASTICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of THRACE PLASTICS has no effect on the direction of Eagle Materials i.e., Eagle Materials and THRACE PLASTICS go up and down completely randomly.

Pair Corralation between Eagle Materials and THRACE PLASTICS

Assuming the 90 days horizon Eagle Materials is expected to under-perform the THRACE PLASTICS. In addition to that, Eagle Materials is 1.53 times more volatile than THRACE PLASTICS. It trades about -0.72 of its total potential returns per unit of risk. THRACE PLASTICS is currently generating about 0.18 per unit of volatility. If you would invest  389.00  in THRACE PLASTICS on October 6, 2024 and sell it today you would earn a total of  11.00  from holding THRACE PLASTICS or generate 2.83% return on investment over 90 days.

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

Eagle Materials  vs.  THRACE PLASTICS

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.

THRACE PLASTICS

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in THRACE PLASTICS are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, THRACE PLASTICS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Eagle Materials and THRACE PLASTICS

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

The idea behind Eagle Materials and THRACE PLASTICS 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.