Correlation Between Eagle Point and XAI Octagon

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

Diversification Opportunities for Eagle Point and XAI Octagon

0.2

Correlation Coefficient

Eagle Point  XAI Octagon

Modest diversification

The 3 months correlation between Eagle and XAI is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Point Credit and XAI Octagon Floating in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XAI Octagon Floating 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 XAI Octagon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XAI Octagon Floating has no effect on the direction of Eagle Point i.e., Eagle Point and XAI Octagon go up and down completely randomly.

Pair Corralation between Eagle Point and XAI Octagon

Given the investment horizon of 90 days Eagle Point Credit is expected to generate 1.59 times more return on investment than XAI Octagon. However, Eagle Point is 1.59 times more volatile than XAI Octagon Floating. It trades about 0.14 of its potential returns per unit of risk. XAI Octagon Floating is currently generating about 0.1 per unit of risk. If you would invest  2,258  in Eagle Point Credit on December 19, 2024 and sell it today you would earn a total of  68.90  from holding Eagle Point Credit or generate 3.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Eagle Point Credit  vs.  XAI Octagon Floating

Eagle Point Credit

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Point Credit are ranked lower than 11 (%) 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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

XAI Octagon Floating

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in XAI Octagon Floating are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, XAI Octagon is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eagle Point and XAI Octagon

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

The idea behind Eagle Point Credit and XAI Octagon Floating 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.