Correlation Between NEWELL RUBBERMAID and Eagle Materials

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Can any of the company-specific risk be diversified away by investing in both NEWELL RUBBERMAID 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 NEWELL RUBBERMAID and Eagle Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NEWELL RUBBERMAID and Eagle Materials, you can compare the effects of market volatilities on NEWELL RUBBERMAID 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 NEWELL RUBBERMAID with a short position of Eagle Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEWELL RUBBERMAID and Eagle Materials.

Diversification Opportunities for NEWELL RUBBERMAID and Eagle Materials

0.19
  Correlation Coefficient

Average diversification

The 3 months correlation between NEWELL and Eagle is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding NEWELL RUBBERMAID and Eagle Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Materials and NEWELL RUBBERMAID 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 NEWELL RUBBERMAID 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 NEWELL RUBBERMAID i.e., NEWELL RUBBERMAID and Eagle Materials go up and down completely randomly.

Pair Corralation between NEWELL RUBBERMAID and Eagle Materials

Assuming the 90 days trading horizon NEWELL RUBBERMAID is expected to generate 2.71 times more return on investment than Eagle Materials. However, NEWELL RUBBERMAID is 2.71 times more volatile than Eagle Materials. It trades about 0.17 of its potential returns per unit of risk. Eagle Materials is currently generating about -0.83 per unit of risk. If you would invest  841.00  in NEWELL RUBBERMAID on September 23, 2024 and sell it today you would earn a total of  106.00  from holding NEWELL RUBBERMAID or generate 12.6% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

NEWELL RUBBERMAID   vs.  Eagle Materials

 Performance 
       Timeline  
NEWELL RUBBERMAID 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in NEWELL RUBBERMAID are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady essential indicators, NEWELL RUBBERMAID unveiled solid returns over the last few months and may actually be approaching a breakup point.
Eagle Materials 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Eagle Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Eagle Materials is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

NEWELL RUBBERMAID and Eagle Materials Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NEWELL RUBBERMAID and Eagle Materials

The main advantage of trading using opposite NEWELL RUBBERMAID and Eagle Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NEWELL RUBBERMAID 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 NEWELL RUBBERMAID 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 Stocks Directory module to find actively traded stocks across global markets.

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