Correlation Between Eagle Mid and Oklahoma Municipal

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

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

Diversification Opportunities for Eagle Mid and Oklahoma Municipal

-0.36

Correlation Coefficient

Eagle Mid  Oklahoma Municipal

Very good diversification

The 3 months correlation between Eagle and Oklahoma is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Mid Cap and Oklahoma Municipal Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oklahoma Municipal and Eagle Mid 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 Mid Cap are associated (or correlated) with Oklahoma Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oklahoma Municipal has no effect on the direction of Eagle Mid i.e., Eagle Mid and Oklahoma Municipal go up and down completely randomly.

Pair Corralation between Eagle Mid and Oklahoma Municipal

Assuming the 90 days horizon Eagle Mid Cap is expected to generate 3.47 times more return on investment than Oklahoma Municipal. However, Eagle Mid is 3.47 times more volatile than Oklahoma Municipal Fund. It trades about 0.29 of its potential returns per unit of risk. Oklahoma Municipal Fund is currently generating about 0.03 per unit of risk. If you would invest  7,807  in Eagle Mid Cap on August 31, 2024 and sell it today you would earn a total of  1,474  from holding Eagle Mid Cap or generate 18.88% return on investment over 90 days.

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

Eagle Mid Cap  vs.  Oklahoma Municipal Fund

Eagle Mid Cap

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Mid Cap are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Eagle Mid showed solid returns over the last few months and may actually be approaching a breakup point.

Oklahoma Municipal

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Eagle Mid and Oklahoma Municipal

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

The idea behind Eagle Mid Cap and Oklahoma Municipal Fund 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.