Correlation Between Sparta Capital and EA Series

Can any of the company-specific risk be diversified away by investing in both Sparta Capital and EA Series 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 Sparta Capital and EA Series into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sparta Capital and EA Series Trust, you can compare the effects of market volatilities on Sparta Capital and EA Series 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 Sparta Capital with a short position of EA Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparta Capital and EA Series.

Diversification Opportunities for Sparta Capital and EA Series

0.21

Correlation Coefficient

Sparta Capital  EA Series

Modest diversification

The 3 months correlation between Sparta and DRLL is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Sparta Capital and EA Series Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EA Series Trust and Sparta Capital 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 Sparta Capital are associated (or correlated) with EA Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EA Series Trust has no effect on the direction of Sparta Capital i.e., Sparta Capital and EA Series go up and down completely randomly.

Pair Corralation between Sparta Capital and EA Series

Assuming the 90 days horizon Sparta Capital is expected to generate 32.04 times more return on investment than EA Series. However, Sparta Capital is 32.04 times more volatile than EA Series Trust. It trades about 0.22 of its potential returns per unit of risk. EA Series Trust is currently generating about -0.07 per unit of risk. If you would invest  1.21  in Sparta Capital on February 21, 2024 and sell it today you would earn a total of  1.79  from holding Sparta Capital or generate 147.93% return on investment over 90 days.

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

Sparta Capital  vs.  EA Series Trust

Sparta Capital

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sparta Capital are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Sparta Capital reported solid returns over the last few months and may actually be approaching a breakup point.

EA Series Trust

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EA Series Trust are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal essential indicators, EA Series may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Sparta Capital and EA Series

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

The idea behind Sparta Capital and EA Series Trust 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.