Correlation Between Eagle Mid and Conestoga Small

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Can any of the company-specific risk be diversified away by investing in both Eagle Mid and Conestoga 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 Eagle Mid and Conestoga Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eagle Mid Cap and Conestoga Small Cap, you can compare the effects of market volatilities on Eagle Mid and Conestoga 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 Eagle Mid with a short position of Conestoga Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Mid and Conestoga Small.

Diversification Opportunities for Eagle Mid and Conestoga Small

0.98
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Eagle and Conestoga is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Mid Cap and Conestoga Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Conestoga Small Cap and Eagle Mid 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 Mid Cap are associated (or correlated) with Conestoga Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Conestoga Small Cap has no effect on the direction of Eagle Mid i.e., Eagle Mid and Conestoga Small go up and down completely randomly.

Pair Corralation between Eagle Mid and Conestoga Small

Assuming the 90 days horizon Eagle Mid is expected to generate 1.24 times less return on investment than Conestoga Small. But when comparing it to its historical volatility, Eagle Mid Cap is 1.03 times less risky than Conestoga Small. It trades about 0.04 of its potential returns per unit of risk. Conestoga Small Cap is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  7,092  in Conestoga Small Cap on September 10, 2024 and sell it today you would earn a total of  1,220  from holding Conestoga Small Cap or generate 17.2% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Eagle Mid Cap  vs.  Conestoga Small Cap

 Performance 
       Timeline  
Eagle Mid Cap 

Risk-Adjusted Performance

26 of 100

 
Weak
 
Strong
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Mid Cap are ranked lower than 26 (%) 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.
Conestoga Small Cap 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Conestoga Small Cap are ranked lower than 15 (%) 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 and Conestoga Small Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Eagle Mid and Conestoga Small

The main advantage of trading using opposite Eagle Mid and Conestoga Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eagle Mid position performs unexpectedly, Conestoga 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 Conestoga Small will offset losses from the drop in Conestoga Small's long position.
The idea behind Eagle Mid Cap and Conestoga Small 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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