Correlation Between Eaton Vance and Princeton Capital

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

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

Diversification Opportunities for Eaton Vance and Princeton Capital

-0.02

Correlation Coefficient

Eaton Vance  Princeton Capital

Good diversification

The 3 months correlation between Eaton and Princeton is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Eaton Vance National and Princeton Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Princeton Capital and Eaton Vance 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 Eaton Vance National are associated (or correlated) with Princeton Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Princeton Capital has no effect on the direction of Eaton Vance i.e., Eaton Vance and Princeton Capital go up and down completely randomly.

Pair Corralation between Eaton Vance and Princeton Capital

Considering the 90-day investment horizon Eaton Vance National is expected to under-perform the Princeton Capital. But the stock apears to be less risky and, when comparing its historical volatility, Eaton Vance National is 15.9 times less risky than Princeton Capital. The stock trades about -0.07 of its potential returns per unit of risk. The Princeton Capital is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Princeton Capital on September 18, 2024 and sell it today you would earn a total of  0.00  from holding Princeton Capital or generate 0.0% return on investment over 90 days.

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

Eaton Vance National  vs.  Princeton Capital

Eaton Vance National

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eaton Vance National has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Eaton Vance is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Princeton Capital

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Princeton Capital are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Princeton Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eaton Vance and Princeton Capital

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

The idea behind Eaton Vance National and Princeton Capital 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.