Correlation Between Eagle Point and Pimco Income

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

Diversification Opportunities for Eagle Point and Pimco Income

0.02

Correlation Coefficient

Eagle Point  Pimco Income

Significant diversification

The 3 months correlation between Eagle and Pimco is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Point Credit and Pimco Income Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Income Strategy 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 Pimco Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Income Strategy has no effect on the direction of Eagle Point i.e., Eagle Point and Pimco Income go up and down completely randomly.

Pair Corralation between Eagle Point and Pimco Income

Considering the 90-day investment horizon Eagle Point Credit is expected to under-perform the Pimco Income. In addition to that, Eagle Point is 3.88 times more volatile than Pimco Income Strategy. It trades about -0.06 of its total potential returns per unit of risk. Pimco Income Strategy is currently generating about 0.24 per unit of volatility. If you would invest  723.00  in Pimco Income Strategy on December 27, 2024 and sell it today you would earn a total of  30.00  from holding Pimco Income Strategy or generate 4.15% return on investment over 90 days.

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

Eagle Point Credit  vs.  Pimco Income Strategy

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.

Pimco Income Strategy

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Income Strategy are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy technical and fundamental indicators, Pimco Income is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Eagle Point and Pimco Income

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

The idea behind Eagle Point Credit and Pimco Income Strategy 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.