Correlation Between Sachem Capital and Eagle Point

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

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

Diversification Opportunities for Sachem Capital and Eagle Point

-0.58

Correlation Coefficient

Sachem Capital  Eagle Point

Excellent diversification

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

Pair Corralation between Sachem Capital and Eagle Point

Given the investment horizon of 90 days Sachem Capital Corp is expected to generate 1.11 times more return on investment than Eagle Point. However, Sachem Capital is 1.11 times more volatile than Eagle Point Credit. It trades about 0.1 of its potential returns per unit of risk. Eagle Point Credit is currently generating about 0.02 per unit of risk. If you would invest  2,378  in Sachem Capital Corp on October 3, 2024 and sell it today you would earn a total of  87.00  from holding Sachem Capital Corp or generate 3.66% return on investment over 90 days.

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

Sachem Capital Corp  vs.  Eagle Point Credit

Sachem Capital Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sachem Capital Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Sachem Capital is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

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 fairly strong fundamental indicators, Eagle Point is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sachem Capital and Eagle Point

The main advantage of trading using opposite Sachem Capital and Eagle Point positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sachem Capital 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 Sachem Capital Corp 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.