Correlation Between World Energy and Eagle Small
Can any of the company-specific risk be diversified away by investing in both World Energy and Eagle Small 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 World Energy and Eagle Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between World Energy Fund and Eagle Small Cap, you can compare the effects of market volatilities on World Energy and Eagle Small 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 World Energy with a short position of Eagle Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of World Energy and Eagle Small.
Diversification Opportunities for World Energy and Eagle Small
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between WORLD and Eagle is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding World Energy Fund and Eagle Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Small Cap and World 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 World Energy Fund are associated (or correlated) with Eagle Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Small Cap has no effect on the direction of World Energy i.e., World Energy and Eagle Small go up and down completely randomly.
Pair Corralation between World Energy and Eagle Small
Assuming the 90 days horizon World Energy Fund is expected to generate 0.57 times more return on investment than Eagle Small. However, World Energy Fund is 1.75 times less risky than Eagle Small. It trades about -0.07 of its potential returns per unit of risk. Eagle Small Cap is currently generating about -0.17 per unit of risk. If you would invest 1,528 in World Energy Fund on December 1, 2024 and sell it today you would lose (111.00) from holding World Energy Fund or give up 7.26% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
World Energy Fund vs. Eagle Small Cap
Performance |
Timeline |
World Energy |
Eagle Small Cap |
World Energy and Eagle Small Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with World Energy and Eagle Small
The main advantage of trading using opposite World Energy and Eagle Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if World Energy position performs unexpectedly, Eagle Small 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 Small will offset losses from the drop in Eagle Small's long position.World Energy vs. Vanguard Growth Index | World Energy vs. Victory Incore Fund | World Energy vs. Glg Intl Small | World Energy vs. Versatile Bond Portfolio |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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