Correlation Between Eagle Materials and ReTo Eco

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

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

Diversification Opportunities for Eagle Materials and ReTo Eco

0.43

Correlation Coefficient

Eagle Materials  ReTo Eco

Very weak diversification

The 3 months correlation between Eagle and ReTo is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Materials and ReTo Eco Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ReTo Eco Solutions 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 ReTo Eco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ReTo Eco Solutions has no effect on the direction of Eagle Materials i.e., Eagle Materials and ReTo Eco go up and down completely randomly.

Pair Corralation between Eagle Materials and ReTo Eco

Considering the 90-day investment horizon Eagle Materials is expected to under-perform the ReTo Eco. But the stock apears to be less risky and, when comparing its historical volatility, Eagle Materials is 10.37 times less risky than ReTo Eco. The stock trades about -0.1 of its potential returns per unit of risk. The ReTo Eco Solutions is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  90.00  in ReTo Eco Solutions on December 2, 2024 and sell it today you would lose (17.00) from holding ReTo Eco Solutions or give up 18.89% of portfolio value over 90 days.

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

Eagle Materials  vs.  ReTo Eco Solutions

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. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

ReTo Eco Solutions

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ReTo Eco Solutions are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, ReTo Eco displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eagle Materials and ReTo Eco

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

The idea behind Eagle Materials and ReTo Eco Solutions 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.