Correlation Between Eagle Small and Commonwealth Real

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

Diversification Opportunities for Eagle Small and Commonwealth Real

0.1

Correlation Coefficient

Eagle Small  Commonwealth Real

Average diversification

The 3 months correlation between Eagle and Commonwealth is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Small Cap and Commonwealth Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Real Estate 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 Commonwealth Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commonwealth Real Estate has no effect on the direction of Eagle Small i.e., Eagle Small and Commonwealth Real go up and down completely randomly.

Pair Corralation between Eagle Small and Commonwealth Real

Assuming the 90 days horizon Eagle Small Cap is expected to generate 1.43 times more return on investment than Commonwealth Real. However, Eagle Small is 1.43 times more volatile than Commonwealth Real Estate. It trades about 0.12 of its potential returns per unit of risk. Commonwealth Real Estate is currently generating about -0.03 per unit of risk. If you would invest  2,951  in Eagle Small Cap on September 14, 2024 and sell it today you would earn a total of  236.00  from holding Eagle Small Cap or generate 8.0% return on investment over 90 days.

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

Eagle Small Cap  vs.  Commonwealth Real Estate

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 forward indicators, Eagle Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Commonwealth Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Commonwealth Real Estate has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Commonwealth Real 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 Small and Commonwealth Real

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

The idea behind Eagle Small Cap and Commonwealth Real Estate 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.