Correlation Between Sp Smallcap and Eagle Small

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

By analyzing existing cross correlation between Sp Smallcap 600 and Eagle Small Cap, you can compare the effects of market volatilities on Sp Smallcap and Eagle 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 Sp Smallcap with a short position of Eagle Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sp Smallcap and Eagle Small.

Diversification Opportunities for Sp Smallcap and Eagle Small

0.85

Correlation Coefficient

Sp Smallcap  Eagle Small

Very poor diversification

The 3 months correlation between RYSVX and Eagle is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Sp Smallcap 600 and Eagle Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Small Cap and Sp Smallcap 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 Sp Smallcap 600 are associated (or correlated) with Eagle Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Small Cap has no effect on the direction of Sp Smallcap i.e., Sp Smallcap and Eagle Small go up and down completely randomly.

Pair Corralation between Sp Smallcap and Eagle Small

Assuming the 90 days horizon Sp Smallcap 600 is expected to generate 0.44 times more return on investment than Eagle Small. However, Sp Smallcap 600 is 2.28 times less risky than Eagle Small. It trades about -0.12 of its potential returns per unit of risk. Eagle Small Cap is currently generating about -0.15 per unit of risk. If you would invest  20,635  in Sp Smallcap 600 on December 27, 2024 and sell it today you would lose (1,804) from holding Sp Smallcap 600 or give up 8.74% of portfolio value over 90 days.

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

Sp Smallcap 600  vs.  Eagle Small Cap

Sp Smallcap 600

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sp Smallcap 600 has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

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.

Pair Trading with Sp Smallcap and Eagle Small

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

The idea behind Sp Smallcap 600 and Eagle 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.