Correlation Between Great Elm and Eagle Point
Can any of the company-specific risk be diversified away by investing in both Great Elm 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 Great Elm and Eagle Point into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great Elm Capital and Eagle Point Credit, you can compare the effects of market volatilities on Great Elm 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 Great Elm with a short position of Eagle Point. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Elm and Eagle Point.
Diversification Opportunities for Great Elm and Eagle Point
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Great and Eagle is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Great Elm 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 Great Elm 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 Great Elm 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 Great Elm i.e., Great Elm and Eagle Point go up and down completely randomly.
Pair Corralation between Great Elm and Eagle Point
Assuming the 90 days horizon Great Elm is expected to generate 29.0 times less return on investment than Eagle Point. But when comparing it to its historical volatility, Great Elm Capital is 1.92 times less risky than Eagle Point. It trades about 0.0 of its potential returns per unit of risk. Eagle Point Credit is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 2,462 in Eagle Point Credit on September 1, 2024 and sell it today you would earn a total of 4.00 from holding Eagle Point Credit or generate 0.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Great Elm Capital vs. Eagle Point Credit
Performance |
| Timeline |
| Great Elm Capital |
| Eagle Point Credit |
Great Elm and Eagle Point Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Great Elm and Eagle Point
The main advantage of trading using opposite Great Elm and Eagle Point positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Elm 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 Great Elm 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.| Eagle Point vs. Oxford Lane Capital | Eagle Point vs. Eagle Point Credit | Eagle Point vs. Eagle Point Credit | Eagle Point vs. Eagle Point Credit |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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