Correlation Between Eagle Small and Federated Government

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

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

Diversification Opportunities for Eagle Small and Federated Government

0.53

Correlation Coefficient

Eagle Small  Federated Government

Very weak diversification

The 3 months correlation between Eagle and Federated is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Small Cap and Federated Government Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Government and Eagle 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 Eagle Small Cap are associated (or correlated) with Federated Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Government has no effect on the direction of Eagle Small i.e., Eagle Small and Federated Government go up and down completely randomly.

Pair Corralation between Eagle Small and Federated Government

Assuming the 90 days horizon Eagle Small Cap is expected to under-perform the Federated Government. In addition to that, Eagle Small is 13.91 times more volatile than Federated Government Income. It trades about -0.29 of its total potential returns per unit of risk. Federated Government Income is currently generating about -0.37 per unit of volatility. If you would invest  884.00  in Federated Government Income on October 15, 2024 and sell it today you would lose (19.00) from holding Federated Government Income or give up 2.15% of portfolio value over 90 days.

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

Eagle Small Cap  vs.  Federated Government Income

Eagle Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eagle Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Federated Government

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Government Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Federated Government 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 Small and Federated Government

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

The idea behind Eagle Small Cap and Federated Government 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.