Correlation Between Eagle Small and Emerging Growth

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

Diversification Opportunities for Eagle Small and Emerging Growth

0.98

Correlation Coefficient

Eagle Small  Emerging Growth

Almost no diversification

The 3 months correlation between Eagle and Emerging is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Small Cap and Emerging Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Growth 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 Emerging Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Growth has no effect on the direction of Eagle Small i.e., Eagle Small and Emerging Growth go up and down completely randomly.

Pair Corralation between Eagle Small and Emerging Growth

Assuming the 90 days horizon Eagle Small is expected to generate 1.2 times less return on investment than Emerging Growth. But when comparing it to its historical volatility, Eagle Small Cap is 1.14 times less risky than Emerging Growth. It trades about 0.11 of its potential returns per unit of risk. Emerging Growth Fund is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,249  in Emerging Growth Fund on September 15, 2024 and sell it today you would earn a total of  110.00  from holding Emerging Growth Fund or generate 8.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.46%
Values	Daily Returns

Eagle Small Cap  vs.  Emerging Growth Fund

Eagle Small Cap

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Small Cap are ranked lower than 8 (%) 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.

Emerging Growth

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Emerging Growth Fund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Emerging Growth may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Eagle Small and Emerging Growth

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

The idea behind Eagle Small Cap and Emerging Growth 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.

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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.