Correlation Between Otis Worldwide and EAGLE MATERIALS

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

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

Diversification Opportunities for Otis Worldwide and EAGLE MATERIALS

0.64

Correlation Coefficient

Otis Worldwide  EAGLE MATERIALS

Poor diversification

The 3 months correlation between Otis and EAGLE is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Otis Worldwide Corp and EAGLE MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EAGLE MATERIALS and Otis Worldwide 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 Otis Worldwide Corp 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 Otis Worldwide i.e., Otis Worldwide and EAGLE MATERIALS go up and down completely randomly.

Pair Corralation between Otis Worldwide and EAGLE MATERIALS

Assuming the 90 days horizon Otis Worldwide Corp is expected to generate 0.59 times more return on investment than EAGLE MATERIALS. However, Otis Worldwide Corp is 1.68 times less risky than EAGLE MATERIALS. It trades about 0.14 of its potential returns per unit of risk. EAGLE MATERIALS is currently generating about 0.05 per unit of risk. If you would invest  8,455  in Otis Worldwide Corp on September 15, 2024 and sell it today you would earn a total of  845.00  from holding Otis Worldwide Corp or generate 9.99% return on investment over 90 days.

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

Otis Worldwide Corp  vs.  EAGLE MATERIALS

Otis Worldwide Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Otis Worldwide Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Otis Worldwide may actually be approaching a critical reversion point that can send shares even higher in January 2025.

EAGLE MATERIALS

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in EAGLE MATERIALS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, EAGLE MATERIALS is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Otis Worldwide and EAGLE MATERIALS

The main advantage of trading using opposite Otis Worldwide and EAGLE MATERIALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Otis Worldwide 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 Otis Worldwide Corp 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.