Correlation Between Eagle Bancorp and Enterprise Bancorp

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Can any of the company-specific risk be diversified away by investing in both Eagle Bancorp and Enterprise Bancorp 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 Bancorp and Enterprise Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eagle Bancorp and Enterprise Bancorp, you can compare the effects of market volatilities on Eagle Bancorp and Enterprise Bancorp 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 Bancorp with a short position of Enterprise Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Bancorp and Enterprise Bancorp.

Diversification Opportunities for Eagle Bancorp and Enterprise Bancorp

0.95
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Eagle and Enterprise is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Bancorp and Enterprise Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enterprise Bancorp and Eagle Bancorp 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 Bancorp are associated (or correlated) with Enterprise Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enterprise Bancorp has no effect on the direction of Eagle Bancorp i.e., Eagle Bancorp and Enterprise Bancorp go up and down completely randomly.

Pair Corralation between Eagle Bancorp and Enterprise Bancorp

Given the investment horizon of 90 days Eagle Bancorp is expected to under-perform the Enterprise Bancorp. In addition to that, Eagle Bancorp is 1.34 times more volatile than Enterprise Bancorp. It trades about -0.04 of its total potential returns per unit of risk. Enterprise Bancorp is currently generating about -0.02 per unit of volatility. If you would invest  3,561  in Enterprise Bancorp on December 30, 2023 and sell it today you would lose (964.00) from holding Enterprise Bancorp or give up 27.07% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Eagle Bancorp  vs.  Enterprise Bancorp

 Performance 
       Timeline  
Eagle Bancorp 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Eagle Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's fundamental drivers remain very healthy which may send shares a bit higher in April 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.
Enterprise Bancorp 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Enterprise Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Eagle Bancorp and Enterprise Bancorp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Eagle Bancorp and Enterprise Bancorp

The main advantage of trading using opposite Eagle Bancorp and Enterprise Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eagle Bancorp position performs unexpectedly, Enterprise Bancorp 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 Enterprise Bancorp will offset losses from the drop in Enterprise Bancorp's long position.
The idea behind Eagle Bancorp and Enterprise Bancorp 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

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