Correlation Between Eagle Point and Special Opportunities

Can any of the company-specific risk be diversified away by investing in both Eagle Point and Special Opportunities 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 Special Opportunities 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 Special Opportunities Closed, you can compare the effects of market volatilities on Eagle Point and Special Opportunities 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 Special Opportunities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Point and Special Opportunities.

Diversification Opportunities for Eagle Point and Special Opportunities

-0.61

Correlation Coefficient

Eagle Point  Special Opportunities

Excellent diversification

The 3 months correlation between Eagle and Special is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Point Credit and Special Opportunities Closed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Special Opportunities 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 Special Opportunities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Special Opportunities has no effect on the direction of Eagle Point i.e., Eagle Point and Special Opportunities go up and down completely randomly.

Pair Corralation between Eagle Point and Special Opportunities

Considering the 90-day investment horizon Eagle Point Credit is expected to under-perform the Special Opportunities. But the stock apears to be less risky and, when comparing its historical volatility, Eagle Point Credit is 1.11 times less risky than Special Opportunities. The stock trades about -0.25 of its potential returns per unit of risk. The Special Opportunities Closed is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  1,463  in Special Opportunities Closed on September 2, 2024 and sell it today you would earn a total of  79.00  from holding Special Opportunities Closed or generate 5.4% return on investment over 90 days.

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

Eagle Point Credit  vs.  Special Opportunities Closed

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.

Special Opportunities

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Special Opportunities Closed are ranked lower than 24 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather weak basic indicators, Special Opportunities exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eagle Point and Special Opportunities

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

The idea behind Eagle Point Credit and Special Opportunities Closed 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.