Correlation Between Guidemark(r) Small/mid and Eagle Small
Can any of the company-specific risk be diversified away by investing in both Guidemark(r) Small/mid and Eagle Small 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 Guidemark(r) Small/mid and Eagle Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guidemark Smallmid Cap and Eagle Small Cap, you can compare the effects of market volatilities on Guidemark(r) Small/mid and Eagle Small 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 Guidemark(r) Small/mid with a short position of Eagle Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guidemark(r) Small/mid and Eagle Small.
Diversification Opportunities for Guidemark(r) Small/mid and Eagle Small
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Guidemark(r) and Eagle is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Guidemark Smallmid Cap and Eagle Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Small Cap and Guidemark(r) Small/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 Guidemark Smallmid Cap are associated (or correlated) with Eagle Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Small Cap has no effect on the direction of Guidemark(r) Small/mid i.e., Guidemark(r) Small/mid and Eagle Small go up and down completely randomly.
Pair Corralation between Guidemark(r) Small/mid and Eagle Small
Assuming the 90 days horizon Guidemark Smallmid Cap is expected to generate 0.97 times more return on investment than Eagle Small. However, Guidemark Smallmid Cap is 1.03 times less risky than Eagle Small. It trades about 0.26 of its potential returns per unit of risk. Eagle Small Cap is currently generating about 0.23 per unit of risk. If you would invest 2,106 in Guidemark Smallmid Cap on August 27, 2024 and sell it today you would earn a total of 168.00 from holding Guidemark Smallmid Cap or generate 7.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Guidemark Smallmid Cap vs. Eagle Small Cap
Performance |
| Timeline |
| Guidemark Smallmid Cap |
| Eagle Small Cap |
Guidemark(r) Small/mid and Eagle Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guidemark(r) Small/mid and Eagle Small
The main advantage of trading using opposite Guidemark(r) Small/mid and Eagle Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guidemark(r) Small/mid position performs unexpectedly, Eagle Small 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 Eagle Small will offset losses from the drop in Eagle Small's long position.The idea behind Guidemark Smallmid Cap and Eagle Small Cap 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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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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