Correlation Between Lafargeholcim and Eagle Materials

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

By analyzing existing cross correlation between Lafargeholcim Ltd ADR and Eagle Materials, you can compare the effects of market volatilities on Lafargeholcim and Eagle Materials 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 Lafargeholcim with a short position of Eagle Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lafargeholcim and Eagle Materials.

Diversification Opportunities for Lafargeholcim and Eagle Materials

-0.71

Correlation Coefficient

Lafargeholcim  Eagle Materials

Pay attention - limited upside

The 3 months correlation between Lafargeholcim and Eagle is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Lafargeholcim Ltd ADR and Eagle Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Materials and Lafargeholcim 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 Lafargeholcim Ltd ADR are associated (or correlated) with Eagle Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Materials has no effect on the direction of Lafargeholcim i.e., Lafargeholcim and Eagle Materials go up and down completely randomly.

Pair Corralation between Lafargeholcim and Eagle Materials

Assuming the 90 days horizon Lafargeholcim Ltd ADR is expected to generate 0.95 times more return on investment than Eagle Materials. However, Lafargeholcim Ltd ADR is 1.06 times less risky than Eagle Materials. It trades about 0.13 of its potential returns per unit of risk. Eagle Materials is currently generating about -0.09 per unit of risk. If you would invest  1,926  in Lafargeholcim Ltd ADR on December 30, 2024 and sell it today you would earn a total of  258.00  from holding Lafargeholcim Ltd ADR or generate 13.4% return on investment over 90 days.

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

Lafargeholcim Ltd ADR  vs.  Eagle Materials

Lafargeholcim ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lafargeholcim Ltd ADR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Lafargeholcim showed solid returns over the last few months and may actually be approaching a breakup point.

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 latest unsteady performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Lafargeholcim and Eagle Materials

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

The idea behind Lafargeholcim Ltd ADR and Eagle Materials 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 CEOs Directory module to screen CEOs from public companies around the world.