Correlation Between Eagle Materials and Cemex SAB

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

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

Diversification Opportunities for Eagle Materials and Cemex SAB

0.6

Correlation Coefficient

Eagle Materials  Cemex SAB

Poor diversification

The 3 months correlation between Eagle and Cemex is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Materials and Cemex SAB de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cemex SAB de 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 Cemex SAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cemex SAB de has no effect on the direction of Eagle Materials i.e., Eagle Materials and Cemex SAB go up and down completely randomly.

Pair Corralation between Eagle Materials and Cemex SAB

Considering the 90-day investment horizon Eagle Materials is expected to under-perform the Cemex SAB. But the stock apears to be less risky and, when comparing its historical volatility, Eagle Materials is 1.1 times less risky than Cemex SAB. The stock trades about -0.28 of its potential returns per unit of risk. The Cemex SAB de is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  843.00  in Cemex SAB de on January 20, 2024 and sell it today you would lose (44.00) from holding Cemex SAB de or give up 5.22% of portfolio value over 90 days.

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

Eagle Materials  vs.  Cemex SAB de

Eagle Materials

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Materials are ranked lower than 12 (%) 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.

Cemex SAB de

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cemex SAB de are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Cemex SAB may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Eagle Materials and Cemex SAB

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

The idea behind Eagle Materials and Cemex SAB de 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.