Correlation Between Eagle Small and Scout Small

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

Diversification Opportunities for Eagle Small and Scout Small

0.98

Correlation Coefficient

Eagle Small  Scout Small

Almost no diversification

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

Pair Corralation between Eagle Small and Scout Small

Assuming the 90 days horizon Eagle Small Cap is expected to under-perform the Scout Small. But the mutual fund apears to be less risky and, when comparing its historical volatility, Eagle Small Cap is 1.15 times less risky than Scout Small. The mutual fund trades about -0.33 of its potential returns per unit of risk. The Scout Small Cap is currently generating about -0.25 of returns per unit of risk over similar time horizon. If you would invest  2,915  in Scout Small Cap on December 4, 2024 and sell it today you would lose (222.00) from holding Scout Small Cap or give up 7.62% of portfolio value over 90 days.

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

Eagle Small Cap  vs.  Scout Small Cap

Eagle Small Cap

Risk-Adjusted Performance

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 April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Scout Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Scout 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 technical indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Eagle Small and Scout Small

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

The idea behind Eagle Small Cap and Scout 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.