Correlation Between State Street and Eagle Point

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

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

Diversification Opportunities for State Street and Eagle Point

-0.64

Correlation Coefficient

State Street  Eagle Point

Excellent diversification

The 3 months correlation between State and Eagle is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding State Street 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 State Street 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 State Street 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 State Street i.e., State Street and Eagle Point go up and down completely randomly.

Pair Corralation between State Street and Eagle Point

Assuming the 90 days trading horizon State Street is expected to under-perform the Eagle Point. In addition to that, State Street is 2.05 times more volatile than Eagle Point Credit. It trades about -0.13 of its total potential returns per unit of risk. Eagle Point Credit is currently generating about 0.11 per unit of volatility. If you would invest  2,445  in Eagle Point Credit on September 26, 2024 and sell it today you would earn a total of  42.30  from holding Eagle Point Credit or generate 1.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

State Street  vs.  Eagle Point Credit

State Street

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days State Street has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, State Street is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Eagle Point Credit

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Point Credit are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Eagle Point is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with State Street and Eagle Point

The main advantage of trading using opposite State Street and Eagle Point positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street 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 State Street 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.