Correlation Between Eagle Capital and Merrill Lynch

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

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

Diversification Opportunities for Eagle Capital and Merrill Lynch

-0.13

Correlation Coefficient

Eagle Capital  Merrill Lynch

Good diversification

The 3 months correlation between Eagle and Merrill is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Capital Growth and Merrill Lynch Depositor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merrill Lynch Depositor and Eagle Capital 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 Capital Growth are associated (or correlated) with Merrill Lynch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merrill Lynch Depositor has no effect on the direction of Eagle Capital i.e., Eagle Capital and Merrill Lynch go up and down completely randomly.

Pair Corralation between Eagle Capital and Merrill Lynch

Considering the 90-day investment horizon Eagle Capital Growth is expected to under-perform the Merrill Lynch. In addition to that, Eagle Capital is 1.34 times more volatile than Merrill Lynch Depositor. It trades about -0.07 of its total potential returns per unit of risk. Merrill Lynch Depositor is currently generating about 0.25 per unit of volatility. If you would invest  2,544  in Merrill Lynch Depositor on October 25, 2024 and sell it today you would earn a total of  153.00  from holding Merrill Lynch Depositor or generate 6.01% return on investment over 90 days.

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

Eagle Capital Growth  vs.  Merrill Lynch Depositor

Eagle Capital Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eagle Capital Growth has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Eagle Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Merrill Lynch Depositor

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Merrill Lynch Depositor are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Merrill Lynch is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eagle Capital and Merrill Lynch

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

The idea behind Eagle Capital Growth and Merrill Lynch Depositor 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.