Correlation Between Merrill Lynch and Eagle Capital

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

By analyzing existing cross correlation between Merrill Lynch Depositor and Eagle Capital Growth, you can compare the effects of market volatilities on Merrill Lynch 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 Merrill Lynch with a short position of Eagle Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merrill Lynch and Eagle Capital.

Diversification Opportunities for Merrill Lynch and Eagle Capital

-0.25

Correlation Coefficient

Merrill Lynch  Eagle Capital

Very good diversification

The 3 months correlation between Merrill and Eagle is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Merrill Lynch Depositor and Eagle Capital Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Capital Growth and Merrill Lynch 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 Merrill Lynch Depositor 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 Growth has no effect on the direction of Merrill Lynch i.e., Merrill Lynch and Eagle Capital go up and down completely randomly.

Pair Corralation between Merrill Lynch and Eagle Capital

Considering the 90-day investment horizon Merrill Lynch Depositor is expected to under-perform the Eagle Capital. In addition to that, Merrill Lynch is 1.05 times more volatile than Eagle Capital Growth. It trades about -0.01 of its total potential returns per unit of risk. Eagle Capital Growth is currently generating about -0.01 per unit of volatility. If you would invest  967.00  in Eagle Capital Growth on October 10, 2024 and sell it today you would lose (7.00) from holding Eagle Capital Growth or give up 0.72% of portfolio value over 90 days.

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

Merrill Lynch Depositor  vs.  Eagle Capital Growth

Merrill Lynch Depositor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merrill Lynch Depositor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Merrill Lynch is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Eagle Capital Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eagle Capital Growth has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Eagle Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Merrill Lynch and Eagle Capital

The main advantage of trading using opposite Merrill Lynch and Eagle Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merrill Lynch 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 Merrill Lynch Depositor and Eagle Capital Growth 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.