Correlation Between Eagle Materials and KLA

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

By analyzing existing cross correlation between Eagle Materials and KLA Corporation, you can compare the effects of market volatilities on Eagle Materials and KLA 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 KLA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Materials and KLA.

Diversification Opportunities for Eagle Materials and KLA

-0.61

Correlation Coefficient

Eagle Materials  KLA

Excellent diversification

The 3 months correlation between Eagle and KLA is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Materials and KLA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLA Corporation 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 KLA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KLA Corporation has no effect on the direction of Eagle Materials i.e., Eagle Materials and KLA go up and down completely randomly.

Pair Corralation between Eagle Materials and KLA

Assuming the 90 days horizon Eagle Materials is expected to under-perform the KLA. But the stock apears to be less risky and, when comparing its historical volatility, Eagle Materials is 1.7 times less risky than KLA. The stock trades about -0.33 of its potential returns per unit of risk. The KLA Corporation is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  62,398  in KLA Corporation on September 13, 2024 and sell it today you would lose (1,088) from holding KLA Corporation or give up 1.74% of portfolio value over 90 days.

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

Eagle Materials  vs.  KLA Corp.

Eagle Materials

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Materials are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Eagle Materials may actually be approaching a critical reversion point that can send shares even higher in January 2025.

KLA Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Eagle Materials and KLA

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

The idea behind Eagle Materials and KLA Corporation 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.