Correlation Between EAGLE MATERIALS and WILLIS LEASE

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

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

Diversification Opportunities for EAGLE MATERIALS and WILLIS LEASE

0.48

Correlation Coefficient

EAGLE MATERIALS  WILLIS LEASE

Very weak diversification

The 3 months correlation between EAGLE and WILLIS is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding EAGLE MATERIALS and WILLIS LEASE FIN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WILLIS LEASE FIN and EAGLE MATERIALS 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 EAGLE MATERIALS are associated (or correlated) with WILLIS LEASE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WILLIS LEASE FIN has no effect on the direction of EAGLE MATERIALS i.e., EAGLE MATERIALS and WILLIS LEASE go up and down completely randomly.

Pair Corralation between EAGLE MATERIALS and WILLIS LEASE

Assuming the 90 days trading horizon EAGLE MATERIALS is expected to generate 4.81 times less return on investment than WILLIS LEASE. But when comparing it to its historical volatility, EAGLE MATERIALS is 1.66 times less risky than WILLIS LEASE. It trades about 0.06 of its potential returns per unit of risk. WILLIS LEASE FIN is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  4,310  in WILLIS LEASE FIN on September 25, 2024 and sell it today you would earn a total of  14,390  from holding WILLIS LEASE FIN or generate 333.87% return on investment over 90 days.

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

EAGLE MATERIALS  vs.  WILLIS LEASE FIN

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. 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.

WILLIS LEASE FIN

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WILLIS LEASE FIN are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WILLIS LEASE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EAGLE MATERIALS and WILLIS LEASE

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

The idea behind EAGLE MATERIALS and WILLIS LEASE FIN 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.