Correlation Between Clean Energy and EAGLE MATERIALS

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

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

Diversification Opportunities for Clean Energy and EAGLE MATERIALS

0.32

Correlation Coefficient

Clean Energy  EAGLE MATERIALS

Weak diversification

The 3 months correlation between Clean and EAGLE is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Clean Energy Fuels and EAGLE MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EAGLE MATERIALS and Clean Energy 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 Clean Energy Fuels 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 Clean Energy i.e., Clean Energy and EAGLE MATERIALS go up and down completely randomly.

Pair Corralation between Clean Energy and EAGLE MATERIALS

Assuming the 90 days horizon Clean Energy is expected to generate 1.52 times less return on investment than EAGLE MATERIALS. In addition to that, Clean Energy is 2.0 times more volatile than EAGLE MATERIALS. It trades about 0.08 of its total potential returns per unit of risk. EAGLE MATERIALS is currently generating about 0.23 per unit of volatility. If you would invest  21,578  in EAGLE MATERIALS on September 5, 2024 and sell it today you would earn a total of  7,022  from holding EAGLE MATERIALS or generate 32.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Clean Energy Fuels  vs.  EAGLE MATERIALS

Clean Energy Fuels

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Clean Energy Fuels are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Clean Energy reported solid returns over the last few months and may actually be approaching a breakup point.

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. In spite of rather unsteady primary indicators, EAGLE MATERIALS exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Clean Energy and EAGLE MATERIALS

The main advantage of trading using opposite Clean Energy and EAGLE MATERIALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clean Energy 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 Clean Energy Fuels 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.