Correlation Between Eagle Point and OFS Credit

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

Diversification Opportunities for Eagle Point and OFS Credit

0.68

Correlation Coefficient

Eagle Point  OFS Credit

Poor diversification

The 3 months correlation between Eagle and OFS is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Point Income and OFS Credit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OFS Credit 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 OFS Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OFS Credit has no effect on the direction of Eagle Point i.e., Eagle Point and OFS Credit go up and down completely randomly.

Pair Corralation between Eagle Point and OFS Credit

Given the investment horizon of 90 days Eagle Point is expected to generate 1.17 times less return on investment than OFS Credit. But when comparing it to its historical volatility, Eagle Point Income is 1.76 times less risky than OFS Credit. It trades about 0.16 of its potential returns per unit of risk. OFS Credit is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,404  in OFS Credit on August 30, 2024 and sell it today you would earn a total of  74.00  from holding OFS Credit or generate 3.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Eagle Point Income  vs.  OFS Credit

Eagle Point Income

Risk-Adjusted Performance

12 of 100

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.

OFS Credit

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in OFS Credit are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, OFS Credit is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Eagle Point and OFS Credit

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

The idea behind Eagle Point Income and OFS Credit 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.