Correlation Between Eagle Materials and National Health

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

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

Diversification Opportunities for Eagle Materials and National Health

0.55

Correlation Coefficient

Eagle Materials  National Health

Very weak diversification

The 3 months correlation between Eagle and National is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Materials and National Health Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Health Investors 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 National Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Health Investors has no effect on the direction of Eagle Materials i.e., Eagle Materials and National Health go up and down completely randomly.

Pair Corralation between Eagle Materials and National Health

Assuming the 90 days horizon Eagle Materials is expected to generate 1.2 times more return on investment than National Health. However, Eagle Materials is 1.2 times more volatile than National Health Investors. It trades about 0.07 of its potential returns per unit of risk. National Health Investors is currently generating about 0.05 per unit of risk. If you would invest  13,057  in Eagle Materials on October 5, 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	Weak
Accuracy	100.0%
Values	Daily Returns

Eagle Materials  vs.  National Health Investors

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.

National Health Investors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Health Investors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Eagle Materials and National Health

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

The idea behind Eagle Materials and National Health Investors 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.