Correlation Between Eagle Point and Horizon Technology

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

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

Diversification Opportunities for Eagle Point and Horizon Technology

0.57

Correlation Coefficient

Eagle Point  Horizon Technology

Very weak diversification

The 3 months correlation between Eagle and Horizon is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Point Credit and Horizon Technology Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon Technology and Eagle Point 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 Eagle Point Credit are associated (or correlated) with Horizon Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horizon Technology has no effect on the direction of Eagle Point i.e., Eagle Point and Horizon Technology go up and down completely randomly.

Pair Corralation between Eagle Point and Horizon Technology

Considering the 90-day investment horizon Eagle Point Credit is expected to generate 0.77 times more return on investment than Horizon Technology. However, Eagle Point Credit is 1.3 times less risky than Horizon Technology. It trades about -0.06 of its potential returns per unit of risk. Horizon Technology Finance is currently generating about -0.19 per unit of risk. If you would invest  933.00  in Eagle Point Credit on September 14, 2024 and sell it today you would lose (30.00) from holding Eagle Point Credit or give up 3.22% of portfolio value over 90 days.

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

Eagle Point Credit  vs.  Horizon Technology Finance

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.

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.

Pair Trading with Eagle Point and Horizon Technology

The main advantage of trading using opposite Eagle Point and Horizon Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eagle Point position performs unexpectedly, Horizon Technology 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 Horizon Technology will offset losses from the drop in Horizon Technology's long position.

The idea behind Eagle Point Credit and Horizon Technology Finance 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.