Correlation Between Eagle Capital and Eagle Growth

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

By analyzing existing cross correlation between Eagle Capital Appreciation and Eagle Growth Income, you can compare the effects of market volatilities on Eagle Capital and Eagle Growth 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 Eagle Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Capital and Eagle Growth.

Diversification Opportunities for Eagle Capital and Eagle Growth

0.08

Correlation Coefficient

Eagle Capital  Eagle Growth

Significant diversification

The 3 months correlation between Eagle and Eagle is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Capital Appreciation and Eagle Growth Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Growth Income 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 Appreciation are associated (or correlated) with Eagle Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Growth Income has no effect on the direction of Eagle Capital i.e., Eagle Capital and Eagle Growth go up and down completely randomly.

Pair Corralation between Eagle Capital and Eagle Growth

Assuming the 90 days horizon Eagle Capital Appreciation is expected to under-perform the Eagle Growth. In addition to that, Eagle Capital is 1.8 times more volatile than Eagle Growth Income. It trades about -0.09 of its total potential returns per unit of risk. Eagle Growth Income is currently generating about -0.02 per unit of volatility. If you would invest  1,910  in Eagle Growth Income on December 28, 2024 and sell it today you would lose (19.00) from holding Eagle Growth Income or give up 0.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Eagle Capital Appreciation  vs.  Eagle Growth Income

Eagle Capital Apprec

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eagle Capital Appreciation has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Eagle Growth Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eagle Growth Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Eagle Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eagle Capital and Eagle Growth

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

The idea behind Eagle Capital Appreciation and Eagle Growth Income 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.