Correlation Between Horizon Technology and Eagle Point

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

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

Diversification Opportunities for Horizon Technology and Eagle Point

0.58

Correlation Coefficient

Horizon Technology  Eagle Point

Very weak diversification

The 3 months correlation between Horizon and Eagle is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Horizon Technology Finance 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 Horizon Technology 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 Horizon Technology Finance 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 Horizon Technology i.e., Horizon Technology and Eagle Point go up and down completely randomly.

Pair Corralation between Horizon Technology and Eagle Point

Given the investment horizon of 90 days Horizon Technology Finance is expected to generate 0.58 times more return on investment than Eagle Point. However, Horizon Technology Finance is 1.72 times less risky than Eagle Point. It trades about 0.21 of its potential returns per unit of risk. Eagle Point Credit is currently generating about -0.04 per unit of risk. If you would invest  915.00  in Horizon Technology Finance on September 13, 2024 and sell it today you would earn a total of  24.00  from holding Horizon Technology Finance or generate 2.62% return on investment over 90 days.

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

Horizon Technology Finance  vs.  Eagle Point Credit

Horizon Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Horizon Technology Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Eagle Point Credit

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eagle Point Credit has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Eagle Point is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Horizon Technology and Eagle Point

The main advantage of trading using opposite Horizon Technology and Eagle Point positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Horizon Technology 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 Horizon Technology Finance 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.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.