Correlation Between Eagle Point and Ready Capital
Can any of the company-specific risk be diversified away by investing in both Eagle Point and Ready Capital 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 Ready Capital 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 Ready Capital, you can compare the effects of market volatilities on Eagle Point and Ready Capital 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 Ready Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Point and Ready Capital.
Diversification Opportunities for Eagle Point and Ready Capital
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Eagle and Ready is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Point Credit and Ready Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ready Capital 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 Ready Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ready Capital has no effect on the direction of Eagle Point i.e., Eagle Point and Ready Capital go up and down completely randomly.
Pair Corralation between Eagle Point and Ready Capital
Given the investment horizon of 90 days Eagle Point Credit is expected to generate 1.41 times more return on investment than Ready Capital. However, Eagle Point is 1.41 times more volatile than Ready Capital. It trades about 0.07 of its potential returns per unit of risk. Ready Capital is currently generating about 0.06 per unit of risk. If you would invest 2,199 in Eagle Point Credit on August 28, 2024 and sell it today you would earn a total of 287.00 from holding Eagle Point Credit or generate 13.05% 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 Credit vs. Ready Capital
Performance |
| Timeline |
| Eagle Point Credit |
| Ready Capital |
Eagle Point and Ready Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eagle Point and Ready Capital
The main advantage of trading using opposite Eagle Point and Ready Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eagle Point position performs unexpectedly, Ready Capital 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 Ready Capital will offset losses from the drop in Ready Capital's long position.The idea behind Eagle Point Credit and Ready Capital 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.| Ready Capital vs. QVCC | Ready Capital vs. Eagle Point Credit | Ready Capital vs. National Rural Utilities |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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