Correlation Between Eagle Point and European Equity

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

Diversification Opportunities for Eagle Point and European Equity

-0.65

Correlation Coefficient

Eagle Point  European Equity

Excellent diversification

The 3 months correlation between Eagle and European is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Point Income and European Equity Closed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Equity Closed 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 European Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Equity Closed has no effect on the direction of Eagle Point i.e., Eagle Point and European Equity go up and down completely randomly.

Pair Corralation between Eagle Point and European Equity

Given the investment horizon of 90 days Eagle Point Income is expected to generate 0.46 times more return on investment than European Equity. However, Eagle Point Income is 2.18 times less risky than European Equity. It trades about 0.07 of its potential returns per unit of risk. European Equity Closed is currently generating about 0.01 per unit of risk. If you would invest  2,100  in Eagle Point Income on October 13, 2024 and sell it today you would earn a total of  302.00  from holding Eagle Point Income or generate 14.38% return on investment over 90 days.

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

Eagle Point Income  vs.  European Equity Closed

Eagle Point Income

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Point Income are ranked lower than 5 (%) 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.

European Equity Closed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days European Equity Closed has generated negative risk-adjusted returns adding no value to fund investors. Despite latest weak performance, the Fund'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 fund investors.

Pair Trading with Eagle Point and European Equity

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

The idea behind Eagle Point Income and European Equity Closed 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.