Correlation Between EAGLE MATERIALS and DR Horton

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

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

Diversification Opportunities for EAGLE MATERIALS and DR Horton

0.27

Correlation Coefficient

EAGLE MATERIALS  DR Horton

Modest diversification

The 3 months correlation between EAGLE and HO2 is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding EAGLE MATERIALS and DR Horton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DR Horton 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 DR Horton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DR Horton has no effect on the direction of EAGLE MATERIALS i.e., EAGLE MATERIALS and DR Horton go up and down completely randomly.

Pair Corralation between EAGLE MATERIALS and DR Horton

Assuming the 90 days trading horizon EAGLE MATERIALS is expected to under-perform the DR Horton. But the stock apears to be less risky and, when comparing its historical volatility, EAGLE MATERIALS is 1.34 times less risky than DR Horton. The stock trades about -0.02 of its potential returns per unit of risk. The DR Horton is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  10,865  in DR Horton on April 24, 2025 and sell it today you would earn a total of  2,009  from holding DR Horton or generate 18.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

EAGLE MATERIALS  vs.  DR Horton

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. 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.

DR Horton

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DR Horton are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DR Horton reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EAGLE MATERIALS and DR Horton

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

The idea behind EAGLE MATERIALS and DR Horton 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.