Correlation Between Eagle Materials and Tecnoglass

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

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

Diversification Opportunities for Eagle Materials and Tecnoglass

0.92

Correlation Coefficient

Eagle Materials  Tecnoglass

Almost no diversification

The 3 months correlation between Eagle and Tecnoglass is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Materials and Tecnoglass in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tecnoglass 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 Tecnoglass. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tecnoglass has no effect on the direction of Eagle Materials i.e., Eagle Materials and Tecnoglass go up and down completely randomly.

Pair Corralation between Eagle Materials and Tecnoglass

Considering the 90-day investment horizon Eagle Materials is expected to generate 1.36 times less return on investment than Tecnoglass. But when comparing it to its historical volatility, Eagle Materials is 1.54 times less risky than Tecnoglass. It trades about 0.23 of its potential returns per unit of risk. Tecnoglass is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  5,955  in Tecnoglass on September 3, 2024 and sell it today you would earn a total of  2,150  from holding Tecnoglass or generate 36.1% return on investment over 90 days.

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

Eagle Materials  vs.  Tecnoglass

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.

Tecnoglass

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tecnoglass are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating essential indicators, Tecnoglass unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eagle Materials and Tecnoglass

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

The idea behind Eagle Materials and Tecnoglass 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.