Correlation Between Eagle Point and QVCC
Can any of the company-specific risk be diversified away by investing in both Eagle Point and QVCC 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 QVCC 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 QVCC, you can compare the effects of market volatilities on Eagle Point and QVCC 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 QVCC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Point and QVCC.
Diversification Opportunities for Eagle Point and QVCC
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Eagle and QVCC is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Point Credit and QVCC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on QVCC 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 QVCC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of QVCC has no effect on the direction of Eagle Point i.e., Eagle Point and QVCC go up and down completely randomly.
Pair Corralation between Eagle Point and QVCC
Given the investment horizon of 90 days Eagle Point is expected to generate 1.43 times less return on investment than QVCC. But when comparing it to its historical volatility, Eagle Point Credit is 4.5 times less risky than QVCC. It trades about 0.05 of its potential returns per unit of risk. QVCC is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1,267 in QVCC on August 24, 2024 and sell it today you would earn a total of 31.00 from holding QVCC or generate 2.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eagle Point Credit vs. QVCC
Performance |
| Timeline |
| Eagle Point Credit |
| QVCC |
Eagle Point and QVCC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eagle Point and QVCC
The main advantage of trading using opposite Eagle Point and QVCC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eagle Point position performs unexpectedly, QVCC 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 QVCC will offset losses from the drop in QVCC's long position.The idea behind Eagle Point Credit and QVCC 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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