Correlation Between Eagle Point and Advantage Solutions

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

By analyzing existing cross correlation between Eagle Point Income and Advantage Solutions, you can compare the effects of market volatilities on Eagle Point and Advantage Solutions 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 Advantage Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Point and Advantage Solutions.

Diversification Opportunities for Eagle Point and Advantage Solutions

-0.34

Correlation Coefficient

Eagle Point  Advantage Solutions

Very good diversification

The 3 months correlation between Eagle and Advantage is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Point Income and Advantage Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantage Solutions 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 Income are associated (or correlated) with Advantage Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advantage Solutions has no effect on the direction of Eagle Point i.e., Eagle Point and Advantage Solutions go up and down completely randomly.

Pair Corralation between Eagle Point and Advantage Solutions

Given the investment horizon of 90 days Eagle Point is expected to generate 17.29 times less return on investment than Advantage Solutions. But when comparing it to its historical volatility, Eagle Point Income is 42.65 times less risky than Advantage Solutions. It trades about 0.16 of its potential returns per unit of risk. Advantage Solutions is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1.27  in Advantage Solutions on December 29, 2024 and sell it today you would lose (0.07) from holding Advantage Solutions or give up 5.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Eagle Point Income  vs.  Advantage Solutions

Eagle Point Income

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Point Income are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Eagle Point is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Advantage Solutions

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Advantage Solutions are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Advantage Solutions showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eagle Point and Advantage Solutions

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

The idea behind Eagle Point Income and Advantage Solutions 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.