Correlation Between Air Transport and Eagle Materials

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

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

Diversification Opportunities for Air Transport and Eagle Materials

0.39

Correlation Coefficient

Air Transport  Eagle Materials

Weak diversification

The 3 months correlation between Air and Eagle is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services and Eagle Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Materials and Air Transport 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 Air Transport Services 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 Air Transport i.e., Air Transport and Eagle Materials go up and down completely randomly.

Pair Corralation between Air Transport and Eagle Materials

Assuming the 90 days horizon Air Transport is expected to generate 1.31 times less return on investment than Eagle Materials. In addition to that, Air Transport is 1.49 times more volatile than Eagle Materials. It trades about 0.03 of its total potential returns per unit of risk. Eagle Materials is currently generating about 0.06 per unit of volatility. If you would invest  16,381  in Eagle Materials on September 30, 2024 and sell it today you would earn a total of  7,419  from holding Eagle Materials or generate 45.29% return on investment over 90 days.

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

Air Transport Services  vs.  Eagle Materials

Air Transport Services

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Transport Services are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Air Transport reported solid returns over the last few months and may actually be approaching a breakup point.

Eagle Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eagle Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Air Transport and Eagle Materials

The main advantage of trading using opposite Air Transport and Eagle Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Transport 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 Air Transport Services 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.