Correlation Between Eagle Materials and CRH Plc

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

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

Diversification Opportunities for Eagle Materials and CRH Plc

0.67

Correlation Coefficient

Eagle Materials  CRH Plc

Poor diversification

The 3 months correlation between Eagle and CRH is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Materials and CRH Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CRH Plc 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 CRH Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CRH Plc has no effect on the direction of Eagle Materials i.e., Eagle Materials and CRH Plc go up and down completely randomly.

Pair Corralation between Eagle Materials and CRH Plc

If you would invest  24,449  in Eagle Materials on September 1, 2024 and sell it today you would earn a total of  6,443  from holding Eagle Materials or generate 26.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.59%
Values	Daily Returns

Eagle Materials  vs.  CRH Plc

Eagle Materials

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Materials are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Eagle Materials reported solid returns over the last few months and may actually be approaching a breakup point.

CRH Plc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Eagle Materials and CRH Plc

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

The idea behind Eagle Materials and CRH Plc 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.