Correlation Between Western Asset and Eagle Capital

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

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

Diversification Opportunities for Western Asset and Eagle Capital

-0.28

Correlation Coefficient

Western Asset  Eagle Capital

Very good diversification

The 3 months correlation between Western and Eagle is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Municipal 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 Western Asset 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 Western Asset Municipal 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 Western Asset i.e., Western Asset and Eagle Capital go up and down completely randomly.

Pair Corralation between Western Asset and Eagle Capital

Considering the 90-day investment horizon Western Asset is expected to generate 1.05 times less return on investment than Eagle Capital. But when comparing it to its historical volatility, Western Asset Municipal is 2.27 times less risky than Eagle Capital. It trades about 0.16 of its potential returns per unit of risk. Eagle Capital Growth is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  938.00  in Eagle Capital Growth on August 31, 2024 and sell it today you would earn a total of  102.00  from holding Eagle Capital Growth or generate 10.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.21%
Values	Daily Returns

Western Asset Municipal  vs.  Eagle Capital Growth

Western Asset Municipal

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Municipal are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly stable technical indicators, Western Asset is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Eagle Capital Growth

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Capital Growth are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Eagle Capital may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Western Asset and Eagle Capital

The main advantage of trading using opposite Western Asset and Eagle Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset 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 Western Asset Municipal 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.