Correlation Between STRATS SM and Eagle Point

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

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

Diversification Opportunities for STRATS SM and Eagle Point

0.19

Correlation Coefficient

STRATS SM  Eagle Point

Average diversification

The 3 months correlation between STRATS and Eagle is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding STRATS SM Trust and Eagle Point Credit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Point Credit and STRATS SM 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 STRATS SM Trust 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 Credit has no effect on the direction of STRATS SM i.e., STRATS SM and Eagle Point go up and down completely randomly.

Pair Corralation between STRATS SM and Eagle Point

Considering the 90-day investment horizon STRATS SM Trust is expected to generate 0.75 times more return on investment than Eagle Point. However, STRATS SM Trust is 1.33 times less risky than Eagle Point. It trades about 0.15 of its potential returns per unit of risk. Eagle Point Credit is currently generating about 0.03 per unit of risk. If you would invest  2,473  in STRATS SM Trust on October 6, 2024 and sell it today you would earn a total of  22.00  from holding STRATS SM Trust or generate 0.89% return on investment over 90 days.

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

STRATS SM Trust  vs.  Eagle Point Credit

STRATS SM Trust

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in STRATS SM Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward-looking indicators, STRATS SM is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Eagle Point Credit

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Point Credit are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with STRATS SM and Eagle Point

The main advantage of trading using opposite STRATS SM and Eagle Point positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STRATS SM 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 STRATS SM Trust and Eagle Point 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.