Correlation Between Eagle Point and First Trust

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

By analyzing existing cross correlation between Eagle Point Income and First Trust Intermediate, you can compare the effects of market volatilities on Eagle Point and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Point and First Trust.

Diversification Opportunities for Eagle Point and First Trust

0.24

Correlation Coefficient

Eagle Point  First Trust

Modest diversification

The 3 months correlation between Eagle and First is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Point Income and First Trust Intermediate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Intermediate 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 Income are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Intermediate has no effect on the direction of Eagle Point i.e., Eagle Point and First Trust go up and down completely randomly.

Pair Corralation between Eagle Point and First Trust

Given the investment horizon of 90 days Eagle Point Income is expected to generate 0.53 times more return on investment than First Trust. However, Eagle Point Income is 1.88 times less risky than First Trust. It trades about 0.16 of its potential returns per unit of risk. First Trust Intermediate is currently generating about 0.07 per unit of risk. If you would invest  2,324  in Eagle Point Income on August 30, 2024 and sell it today you would earn a total of  63.00  from holding Eagle Point Income or generate 2.71% return on investment over 90 days.

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

Eagle Point Income  vs.  First Trust Intermediate

Eagle Point Income

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Point Income are ranked lower than 12 (%) 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.

First Trust Intermediate

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Intermediate are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly stable basic indicators, First Trust is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Eagle Point and First Trust

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

The idea behind Eagle Point Income and First Trust Intermediate 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.