Correlation Between High-yield Municipal and Eagle Point

Can any of the company-specific risk be diversified away by investing in both High-yield Municipal and Eagle Point 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 High-yield Municipal and Eagle Point into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between High Yield Municipal Fund and Eagle Point Income, you can compare the effects of market volatilities on High-yield Municipal and Eagle Point 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 High-yield Municipal with a short position of Eagle Point. Check out your portfolio center. Please also check ongoing floating volatility patterns of High-yield Municipal and Eagle Point.

Diversification Opportunities for High-yield Municipal and Eagle Point

0.25

Correlation Coefficient

High-yield Municipal  Eagle Point

Modest diversification

The 3 months correlation between High-yield and Eagle is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Municipal Fund and Eagle Point Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Point Income and High-yield Municipal 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 High Yield Municipal Fund are associated (or correlated) with Eagle Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Point Income has no effect on the direction of High-yield Municipal i.e., High-yield Municipal and Eagle Point go up and down completely randomly.

Pair Corralation between High-yield Municipal and Eagle Point

Assuming the 90 days horizon High-yield Municipal is expected to generate 3.59 times less return on investment than Eagle Point. But when comparing it to its historical volatility, High Yield Municipal Fund is 1.78 times less risky than Eagle Point. It trades about 0.07 of its potential returns per unit of risk. Eagle Point Income is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,328  in Eagle Point Income on December 19, 2024 and sell it today you would earn a total of  89.00  from holding Eagle Point Income or generate 3.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

High Yield Municipal Fund  vs.  Eagle Point Income

High Yield Municipal

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in High Yield Municipal Fund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, High-yield Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Eagle Point Income

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Point Income are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Eagle Point is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with High-yield Municipal and Eagle Point

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

The idea behind High Yield Municipal Fund and Eagle Point Income 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.