Correlation Between Rayonier Advanced and EAGLE MATERIALS

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

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

Diversification Opportunities for Rayonier Advanced and EAGLE MATERIALS

0.75

Correlation Coefficient

Rayonier Advanced  EAGLE MATERIALS

Poor diversification

The 3 months correlation between Rayonier and EAGLE is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Rayonier Advanced Materials and EAGLE MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EAGLE MATERIALS and Rayonier Advanced 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 Rayonier Advanced Materials 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 Rayonier Advanced i.e., Rayonier Advanced and EAGLE MATERIALS go up and down completely randomly.

Pair Corralation between Rayonier Advanced and EAGLE MATERIALS

Assuming the 90 days horizon Rayonier Advanced Materials is expected to generate 1.64 times more return on investment than EAGLE MATERIALS. However, Rayonier Advanced is 1.64 times more volatile than EAGLE MATERIALS. It trades about 0.09 of its potential returns per unit of risk. EAGLE MATERIALS is currently generating about 0.08 per unit of risk. If you would invest  525.00  in Rayonier Advanced Materials on September 15, 2024 and sell it today you would earn a total of  245.00  from holding Rayonier Advanced Materials or generate 46.67% return on investment over 90 days.

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

Rayonier Advanced Materials  vs.  EAGLE MATERIALS

Rayonier Advanced

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rayonier Advanced Materials are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Rayonier Advanced reported solid returns over the last few months and may actually be approaching a breakup point.

EAGLE MATERIALS

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in EAGLE MATERIALS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Rayonier Advanced and EAGLE MATERIALS

The main advantage of trading using opposite Rayonier Advanced and EAGLE MATERIALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rayonier Advanced 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's long position.

The idea behind Rayonier Advanced Materials 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.