Correlation Between Eagle Point and Gladstone Capital

Can any of the company-specific risk be diversified away by investing in both Eagle Point and Gladstone 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 Gladstone 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 Gladstone Capital, you can compare the effects of market volatilities on Eagle Point and Gladstone 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 Gladstone Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Point and Gladstone Capital.

Diversification Opportunities for Eagle Point and Gladstone Capital

0.44

Correlation Coefficient

Eagle Point  Gladstone Capital

Very weak diversification

The 3 months correlation between Eagle and Gladstone is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Point Credit and Gladstone Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gladstone 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 Gladstone Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gladstone Capital has no effect on the direction of Eagle Point i.e., Eagle Point and Gladstone Capital go up and down completely randomly.

Pair Corralation between Eagle Point and Gladstone Capital

Considering the 90-day investment horizon Eagle Point Credit is expected to under-perform the Gladstone Capital. But the stock apears to be less risky and, when comparing its historical volatility, Eagle Point Credit is 1.22 times less risky than Gladstone Capital. The stock trades about -0.07 of its potential returns per unit of risk. The Gladstone Capital is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,748  in Gladstone Capital on December 26, 2024 and sell it today you would earn a total of  29.00  from holding Gladstone Capital or generate 1.06% return on investment over 90 days.

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

Eagle Point Credit  vs.  Gladstone Capital

Eagle Point Credit

Risk-Adjusted Performance

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.

Gladstone Capital

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gladstone Capital are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Gladstone Capital is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Eagle Point and Gladstone Capital

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

The idea behind Eagle Point Credit and Gladstone 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.

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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.