Correlation Between Special Opportunities and Eagle Point

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

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

Diversification Opportunities for Special Opportunities and Eagle Point

0.03

Correlation Coefficient

Special Opportunities  Eagle Point

Significant diversification

The 3 months correlation between Special and Eagle is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Special Opportunities Closed 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 Special Opportunities 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 Special Opportunities Closed 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 Special Opportunities i.e., Special Opportunities and Eagle Point go up and down completely randomly.

Pair Corralation between Special Opportunities and Eagle Point

Considering the 90-day investment horizon Special Opportunities Closed is expected to generate 0.66 times more return on investment than Eagle Point. However, Special Opportunities Closed is 1.51 times less risky than Eagle Point. It trades about 0.14 of its potential returns per unit of risk. Eagle Point Credit is currently generating about -0.06 per unit of risk. If you would invest  1,424  in Special Opportunities Closed on December 27, 2024 and sell it today you would earn a total of  87.00  from holding Special Opportunities Closed or generate 6.11% return on investment over 90 days.

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

Special Opportunities Closed  vs.  Eagle Point Credit

Special Opportunities

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Special Opportunities Closed are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound basic indicators, Special Opportunities is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Eagle Point Credit

Risk-Adjusted Performance

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 Special Opportunities and Eagle Point

The main advantage of trading using opposite Special Opportunities and Eagle Point positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Special Opportunities 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 Special Opportunities Closed 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 Anywhere module to track or share privately all of your investments from the convenience of any device.