Correlation Between Eagle Small and Eagle Capital

Can any of the company-specific risk be diversified away by investing in both Eagle Small and Eagle 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 Eagle Small and Eagle Capital 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 Eagle Capital Appreciation, you can compare the effects of market volatilities on Eagle Small and Eagle 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 Eagle Small with a short position of Eagle Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Small and Eagle Capital.

Diversification Opportunities for Eagle Small and Eagle Capital

0.7

Correlation Coefficient

Eagle Small  Eagle Capital

Poor diversification

The 3 months correlation between Eagle and Eagle is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Small Cap and Eagle Capital Appreciation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Capital Apprec 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 Eagle Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Capital Apprec has no effect on the direction of Eagle Small i.e., Eagle Small and Eagle Capital go up and down completely randomly.

Pair Corralation between Eagle Small and Eagle Capital

Assuming the 90 days horizon Eagle Small is expected to generate 2.87 times less return on investment than Eagle Capital. In addition to that, Eagle Small is 1.05 times more volatile than Eagle Capital Appreciation. It trades about 0.03 of its total potential returns per unit of risk. Eagle Capital Appreciation is currently generating about 0.1 per unit of volatility. If you would invest  3,658  in Eagle Capital Appreciation on September 28, 2024 and sell it today you would earn a total of  2,711  from holding Eagle Capital Appreciation or generate 74.11% return on investment over 90 days.

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

Eagle Small Cap  vs.  Eagle Capital Appreciation

Eagle Small Cap

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Small Cap are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Eagle Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Eagle Capital Apprec

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Capital Appreciation are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Eagle Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Eagle Small and Eagle Capital

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

The idea behind Eagle Small Cap and Eagle Capital Appreciation 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.