Correlation Between National Rural and Eagle Point
Can any of the company-specific risk be diversified away by investing in both National Rural 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 National Rural and Eagle Point into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Rural Utilities and Eagle Point Credit, you can compare the effects of market volatilities on National Rural 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 National Rural with a short position of Eagle Point. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Rural and Eagle Point.
Diversification Opportunities for National Rural and Eagle Point
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between National and Eagle is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding National Rural Utilities 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 National Rural 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 National Rural Utilities 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 National Rural i.e., National Rural and Eagle Point go up and down completely randomly.
Pair Corralation between National Rural and Eagle Point
Given the investment horizon of 90 days National Rural is expected to generate 1.19 times less return on investment than Eagle Point. But when comparing it to its historical volatility, National Rural Utilities is 1.06 times less risky than Eagle Point. It trades about 0.05 of its potential returns per unit of risk. Eagle Point Credit is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,081 in Eagle Point Credit on August 24, 2024 and sell it today you would earn a total of 409.00 from holding Eagle Point Credit or generate 19.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Rural Utilities vs. Eagle Point Credit
Performance |
| Timeline |
| National Rural Utilities |
| Eagle Point Credit |
National Rural and Eagle Point Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Rural and Eagle Point
The main advantage of trading using opposite National Rural and Eagle Point positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Rural 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.| National Rural vs. CMS Energy Corp | National Rural vs. Southern Co | National Rural vs. Duke Energy Corp | National Rural vs. Southern Co |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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