Correlation Between Eagle Small and Transamerica International

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

Diversification Opportunities for Eagle Small and Transamerica International

-0.43

Correlation Coefficient

Eagle Small  Transamerica International

Very good diversification

The 3 months correlation between Eagle and Transamerica is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Small Cap and Transamerica International Gro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica International 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 Transamerica International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica International has no effect on the direction of Eagle Small i.e., Eagle Small and Transamerica International go up and down completely randomly.

Pair Corralation between Eagle Small and Transamerica International

Assuming the 90 days horizon Eagle Small Cap is expected to generate 1.61 times more return on investment than Transamerica International. However, Eagle Small is 1.61 times more volatile than Transamerica International Growth. It trades about 0.02 of its potential returns per unit of risk. Transamerica International Growth is currently generating about -0.14 per unit of risk. If you would invest  2,500  in Eagle Small Cap on September 25, 2024 and sell it today you would earn a total of  31.00  from holding Eagle Small Cap or generate 1.24% return on investment over 90 days.

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

Eagle Small Cap  vs.  Transamerica International Gro

Eagle Small Cap

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Small Cap are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Eagle Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Transamerica International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Eagle Small and Transamerica International

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

The idea behind Eagle Small Cap and Transamerica International 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.