Correlation Between Eagle Point and Burford Capital

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

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

Diversification Opportunities for Eagle Point and Burford Capital

-0.17

Correlation Coefficient

Eagle Point  Burford Capital

Good diversification

The 3 months correlation between Eagle and Burford is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Point Credit and Burford Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burford Capital and Eagle Point 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 Eagle Point Credit are associated (or correlated) with Burford Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Burford Capital has no effect on the direction of Eagle Point i.e., Eagle Point and Burford Capital go up and down completely randomly.

Pair Corralation between Eagle Point and Burford Capital

Considering the 90-day investment horizon Eagle Point Credit is expected to under-perform the Burford Capital. But the stock apears to be less risky and, when comparing its historical volatility, Eagle Point Credit is 2.25 times less risky than Burford Capital. The stock trades about -0.04 of its potential returns per unit of risk. The Burford Capital is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,327  in Burford Capital on September 13, 2024 and sell it today you would earn a total of  55.00  from holding Burford Capital or generate 4.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Eagle Point Credit  vs.  Burford Capital

Eagle Point Credit

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eagle Point Credit has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Eagle Point is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Burford Capital

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Burford Capital are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Burford Capital is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Eagle Point and Burford Capital

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

The idea behind Eagle Point Credit and Burford Capital 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.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.