Correlation Between Disney and Eagle Point

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

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

Diversification Opportunities for Disney and Eagle Point

0.44

Correlation Coefficient

Disney  Eagle Point

Very weak diversification

The 3 months correlation between Disney and Eagle is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Eagle Point Credit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Point Credit and Disney 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 Walt Disney 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 Credit has no effect on the direction of Disney i.e., Disney and Eagle Point go up and down completely randomly.

Pair Corralation between Disney and Eagle Point

Considering the 90-day investment horizon Disney is expected to generate 2.17 times less return on investment than Eagle Point. In addition to that, Disney is 2.14 times more volatile than Eagle Point Credit. It trades about 0.01 of its total potential returns per unit of risk. Eagle Point Credit is currently generating about 0.04 per unit of volatility. If you would invest  1,748  in Eagle Point Credit on October 22, 2024 and sell it today you would earn a total of  230.00  from holding Eagle Point Credit or generate 13.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Walt Disney  vs.  Eagle Point Credit

Walt Disney

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Disney may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Eagle Point Credit

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Point Credit are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Eagle Point is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Disney and Eagle Point

The main advantage of trading using opposite Disney and Eagle Point positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney 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 Walt Disney and Eagle Point Credit 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 Transaction History module to view history of all your transactions and understand their impact on performance.