Correlation Between Gladstone Capital and Eagle Point

Can any of the company-specific risk be diversified away by investing in both Gladstone 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 Gladstone 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 Gladstone Capital and Eagle Point Credit, you can compare the effects of market volatilities on Gladstone 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 Gladstone Capital with a short position of Eagle Point. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gladstone Capital and Eagle Point.

Diversification Opportunities for Gladstone Capital and Eagle Point

-0.63

Correlation Coefficient

Gladstone Capital  Eagle Point

Excellent diversification

The 3 months correlation between Gladstone and Eagle is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Gladstone Capital 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 Gladstone 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 Gladstone Capital 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 Gladstone Capital i.e., Gladstone Capital and Eagle Point go up and down completely randomly.

Pair Corralation between Gladstone Capital and Eagle Point

Given the investment horizon of 90 days Gladstone Capital is expected to generate 1.24 times more return on investment than Eagle Point. However, Gladstone Capital is 1.24 times more volatile than Eagle Point Credit. It trades about 0.35 of its potential returns per unit of risk. Eagle Point Credit is currently generating about -0.07 per unit of risk. If you would invest  2,254  in Gladstone Capital on September 14, 2024 and sell it today you would earn a total of  538.50  from holding Gladstone Capital or generate 23.89% return on investment over 90 days.

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

Gladstone Capital  vs.  Eagle Point Credit

Gladstone Capital

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Gladstone Capital are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Gladstone Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Gladstone Capital and Eagle Point

The main advantage of trading using opposite Gladstone Capital and Eagle Point positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gladstone 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 Gladstone Capital 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.