Correlation Between Eagle Point and American Financial

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

Diversification Opportunities for Eagle Point and American Financial

-0.07

Correlation Coefficient

Eagle Point  American Financial

Good diversification

The 3 months correlation between Eagle and American is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Point Credit and American Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Financial 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 American Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Financial has no effect on the direction of Eagle Point i.e., Eagle Point and American Financial go up and down completely randomly.

Pair Corralation between Eagle Point and American Financial

Given the investment horizon of 90 days Eagle Point is expected to generate 1.1 times less return on investment than American Financial. But when comparing it to its historical volatility, Eagle Point Credit is 1.55 times less risky than American Financial. It trades about 0.05 of its potential returns per unit of risk. American Financial Group is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,984  in American Financial Group on September 20, 2024 and sell it today you would earn a total of  317.00  from holding American Financial Group or generate 15.98% 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.  American Financial Group

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 fairly strong fundamental indicators, Eagle Point is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Preferred Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Eagle Point and American Financial

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

The idea behind Eagle Point Credit and American Financial Group 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.