Correlation Between Eagle Materials and Varta AG

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

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

Diversification Opportunities for Eagle Materials and Varta AG

0.22

Correlation Coefficient

Eagle Materials  Varta AG

Modest diversification

The 3 months correlation between Eagle and Varta is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Materials and Varta AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Varta AG 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 Varta AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Varta AG has no effect on the direction of Eagle Materials i.e., Eagle Materials and Varta AG go up and down completely randomly.

Pair Corralation between Eagle Materials and Varta AG

Assuming the 90 days horizon Eagle Materials is expected to generate 0.23 times more return on investment than Varta AG. However, Eagle Materials is 4.29 times less risky than Varta AG. It trades about 0.07 of its potential returns per unit of risk. Varta AG is currently generating about -0.02 per unit of risk. If you would invest  13,057  in Eagle Materials on October 4, 2024 and sell it today you would earn a total of  10,543  from holding Eagle Materials or generate 80.75% 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.  Varta AG

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.

Varta AG

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Varta AG are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Varta AG exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eagle Materials and Varta AG

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

The idea behind Eagle Materials and Varta AG 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.