Correlation Between Oxford Lane and Eagle Point

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

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

Diversification Opportunities for Oxford Lane and Eagle Point

0.84

Correlation Coefficient

Oxford Lane  Eagle Point

Very poor diversification

The 3 months correlation between Oxford and Eagle is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Oxford Lane 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 Oxford Lane 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 Oxford Lane 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 Oxford Lane i.e., Oxford Lane and Eagle Point go up and down completely randomly.

Pair Corralation between Oxford Lane and Eagle Point

Assuming the 90 days horizon Oxford Lane Capital is expected to generate 0.61 times more return on investment than Eagle Point. However, Oxford Lane Capital is 1.63 times less risky than Eagle Point. It trades about 0.11 of its potential returns per unit of risk. Eagle Point Income is currently generating about 0.07 per unit of risk. If you would invest  2,262  in Oxford Lane Capital on October 22, 2024 and sell it today you would earn a total of  236.00  from holding Oxford Lane Capital or generate 10.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	72.38%
Values	Daily Returns

Oxford Lane Capital  vs.  Eagle Point Income

Oxford Lane Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oxford Lane Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Oxford Lane is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Eagle Point Income

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Point Income are ranked lower than 7 (%) 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 Oxford Lane and Eagle Point

The main advantage of trading using opposite Oxford Lane and Eagle Point positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oxford Lane 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 Oxford Lane 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.