Correlation Between Great Elm and Eagle Point

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

By analyzing existing cross correlation between Great Elm Capital and Eagle Point Income, you can compare the effects of market volatilities on Great Elm and Eagle Point 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 Great Elm with a short position of Eagle Point. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Elm and Eagle Point.

Diversification Opportunities for Great Elm and Eagle Point

0.72

Correlation Coefficient

Great Elm  Eagle Point

Poor diversification

The 3 months correlation between Great and Eagle is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Great Elm Capital and Eagle Point Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Point Income and Great Elm 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 Great Elm Capital are associated (or correlated) with Eagle Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Point Income has no effect on the direction of Great Elm i.e., Great Elm and Eagle Point go up and down completely randomly.

Pair Corralation between Great Elm and Eagle Point

Assuming the 90 days horizon Great Elm Capital is expected to generate 1.57 times more return on investment than Eagle Point. However, Great Elm is 1.57 times more volatile than Eagle Point Income. It trades about 0.19 of its potential returns per unit of risk. Eagle Point Income is currently generating about 0.15 per unit of risk. If you would invest  2,438  in Great Elm Capital on December 28, 2024 and sell it today you would earn a total of  161.00  from holding Great Elm Capital or generate 6.6% return on investment over 90 days.

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

Great Elm Capital  vs.  Eagle Point Income

Great Elm Capital

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Great Elm Capital are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Great Elm may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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.

Pair Trading with Great Elm and Eagle Point

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

The idea behind Great Elm Capital and Eagle Point Income 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.