Correlation Between WILLIS LEASE and EAGLE MATERIALS

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

By analyzing existing cross correlation between WILLIS LEASE FIN and EAGLE MATERIALS, you can compare the effects of market volatilities on WILLIS LEASE 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 WILLIS LEASE with a short position of EAGLE MATERIALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of WILLIS LEASE and EAGLE MATERIALS.

Diversification Opportunities for WILLIS LEASE and EAGLE MATERIALS

0.66

Correlation Coefficient

WILLIS LEASE  EAGLE MATERIALS

Poor diversification

The 3 months correlation between WILLIS and EAGLE is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding WILLIS LEASE FIN and EAGLE MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EAGLE MATERIALS and WILLIS LEASE 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 WILLIS LEASE FIN 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 WILLIS LEASE i.e., WILLIS LEASE and EAGLE MATERIALS go up and down completely randomly.

Pair Corralation between WILLIS LEASE and EAGLE MATERIALS

Assuming the 90 days horizon WILLIS LEASE FIN is expected to under-perform the EAGLE MATERIALS. In addition to that, WILLIS LEASE is 1.53 times more volatile than EAGLE MATERIALS. It trades about -0.07 of its total potential returns per unit of risk. EAGLE MATERIALS is currently generating about -0.1 per unit of volatility. If you would invest  23,772  in EAGLE MATERIALS on December 29, 2024 and sell it today you would lose (3,572) from holding EAGLE MATERIALS or give up 15.03% of portfolio value over 90 days.

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

WILLIS LEASE FIN  vs.  EAGLE MATERIALS

WILLIS LEASE FIN

Risk-Adjusted Performance

Very Weak

Over the last 90 days WILLIS LEASE FIN has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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. In spite of uncertain performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with WILLIS LEASE and EAGLE MATERIALS

The main advantage of trading using opposite WILLIS LEASE and EAGLE MATERIALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WILLIS LEASE 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's long position.

The idea behind WILLIS LEASE FIN 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.