Correlation Between Conestoga Small and Eagle Mid

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

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

Diversification Opportunities for Conestoga Small and Eagle Mid

0.96

Correlation Coefficient

Conestoga Small  Eagle Mid

Almost no diversification

The 3 months correlation between Conestoga and Eagle is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Conestoga Small Cap and Eagle Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Mid Cap and Conestoga Small 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 Conestoga Small Cap are associated (or correlated) with Eagle Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Mid Cap has no effect on the direction of Conestoga Small i.e., Conestoga Small and Eagle Mid go up and down completely randomly.

Pair Corralation between Conestoga Small and Eagle Mid

Assuming the 90 days horizon Conestoga Small is expected to generate 1.23 times less return on investment than Eagle Mid. In addition to that, Conestoga Small is 1.23 times more volatile than Eagle Mid Cap. It trades about 0.22 of its total potential returns per unit of risk. Eagle Mid Cap is currently generating about 0.33 per unit of volatility. If you would invest  7,824  in Eagle Mid Cap on September 7, 2024 and sell it today you would earn a total of  1,704  from holding Eagle Mid Cap or generate 21.78% return on investment over 90 days.

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

Conestoga Small Cap  vs.  Eagle Mid Cap

Conestoga Small Cap

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Conestoga Small Cap are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Conestoga Small showed solid returns over the last few months and may actually be approaching a breakup point.

Eagle Mid Cap

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Mid Cap are ranked lower than 25 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Eagle Mid showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Conestoga Small and Eagle Mid

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

The idea behind Conestoga Small Cap and Eagle Mid Cap 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.