Correlation Between Vulcan Materials and Eagle Materials

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

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

Diversification Opportunities for Vulcan Materials and Eagle Materials

0.91

Correlation Coefficient

Vulcan Materials  Eagle Materials

Almost no diversification

The 3 months correlation between Vulcan and Eagle is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials and Eagle Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Materials and Vulcan 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 Vulcan 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 Vulcan Materials i.e., Vulcan Materials and Eagle Materials go up and down completely randomly.

Pair Corralation between Vulcan Materials and Eagle Materials

Considering the 90-day investment horizon Vulcan Materials is expected to under-perform the Eagle Materials. But the stock apears to be less risky and, when comparing its historical volatility, Vulcan Materials is 1.04 times less risky than Eagle Materials. The stock trades about -0.07 of its potential returns per unit of risk. The Eagle Materials is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  24,715  in Eagle Materials on January 3, 2025 and sell it today you would lose (1,817) from holding Eagle Materials or give up 7.35% of portfolio value over 90 days.

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

Vulcan Materials  vs.  Eagle Materials

Vulcan Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vulcan Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Eagle Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eagle Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Vulcan Materials and Eagle Materials

The main advantage of trading using opposite Vulcan Materials and Eagle Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vulcan Materials 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' long position.

The idea behind Vulcan 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.