Correlation Between Eagle Small and Green Century

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

Diversification Opportunities for Eagle Small and Green Century

0.9

Correlation Coefficient

Eagle Small  Green Century

Almost no diversification

The 3 months correlation between Eagle and Green is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Small Cap and Green Century Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Century Equity 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 Green Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Century Equity has no effect on the direction of Eagle Small i.e., Eagle Small and Green Century go up and down completely randomly.

Pair Corralation between Eagle Small and Green Century

Assuming the 90 days horizon Eagle Small is expected to generate 1.96 times less return on investment than Green Century. In addition to that, Eagle Small is 1.35 times more volatile than Green Century Equity. It trades about 0.04 of its total potential returns per unit of risk. Green Century Equity is currently generating about 0.12 per unit of volatility. If you would invest  5,801  in Green Century Equity on September 14, 2024 and sell it today you would earn a total of  3,724  from holding Green Century Equity or generate 64.2% return on investment over 90 days.

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

Eagle Small Cap  vs.  Green Century Equity

Eagle Small Cap

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Small Cap are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Eagle Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Green Century Equity

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Green Century Equity are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Green Century may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Eagle Small and Green Century

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

The idea behind Eagle Small Cap and Green Century Equity 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.