Correlation Between Ares Dynamic and Eagle Point

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

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

Diversification Opportunities for Ares Dynamic and Eagle Point

0.6

Correlation Coefficient

Ares Dynamic  Eagle Point

Poor diversification

The 3 months correlation between Ares and Eagle is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Ares Dynamic Credit 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 Ares Dynamic 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 Ares Dynamic Credit 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 Ares Dynamic i.e., Ares Dynamic and Eagle Point go up and down completely randomly.

Pair Corralation between Ares Dynamic and Eagle Point

Given the investment horizon of 90 days Ares Dynamic Credit is expected to under-perform the Eagle Point. In addition to that, Ares Dynamic is 1.14 times more volatile than Eagle Point Income. It trades about -0.05 of its total potential returns per unit of risk. Eagle Point Income is currently generating about 0.04 per unit of volatility. If you would invest  2,370  in Eagle Point Income on September 25, 2024 and sell it today you would earn a total of  10.00  from holding Eagle Point Income or generate 0.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Ares Dynamic Credit  vs.  Eagle Point Income

Ares Dynamic Credit

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Dynamic Credit are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound fundamental indicators, Ares Dynamic is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Eagle Point Income

Risk-Adjusted Performance

3 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Point Income are ranked lower than 3 (%) 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 Ares Dynamic and Eagle Point

The main advantage of trading using opposite Ares Dynamic and Eagle Point positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Dynamic 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 Ares Dynamic Credit 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.