Correlation Between Eagle Financial and Eagle Bancorp

Can any of the company-specific risk be diversified away by investing in both Eagle Financial and Eagle 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 Financial and Eagle Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eagle Financial Services and Eagle Bancorp, you can compare the effects of market volatilities on Eagle Financial and Eagle 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 Financial with a short position of Eagle Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Financial and Eagle Bancorp.

Diversification Opportunities for Eagle Financial and Eagle Bancorp

0.35

Correlation Coefficient

Eagle Financial  Eagle Bancorp

Weak diversification

The 3 months correlation between Eagle and Eagle is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Financial Services and Eagle Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Bancorp and Eagle Financial 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 Financial Services are associated (or correlated) with Eagle Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Bancorp has no effect on the direction of Eagle Financial i.e., Eagle Financial and Eagle Bancorp go up and down completely randomly.

Pair Corralation between Eagle Financial and Eagle Bancorp

Given the investment horizon of 90 days Eagle Financial Services is expected to generate 0.21 times more return on investment than Eagle Bancorp. However, Eagle Financial Services is 4.8 times less risky than Eagle Bancorp. It trades about -0.29 of its potential returns per unit of risk. Eagle Bancorp is currently generating about -0.18 per unit of risk. If you would invest  2,957  in Eagle Financial Services on January 30, 2024 and sell it today you would lose (118.00) from holding Eagle Financial Services or give up 3.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Eagle Financial Services  vs.  Eagle Bancorp

Eagle Financial Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eagle Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Eagle Financial is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Eagle Bancorp

Risk-Adjusted Performance

0 of 100

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 unfluctuating performance in the last few months, the Stock's fundamental drivers remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Eagle Financial and Eagle Bancorp

The main advantage of trading using opposite Eagle Financial and Eagle Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eagle Financial position performs unexpectedly, Eagle 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 Eagle Bancorp will offset losses from the drop in Eagle Bancorp's long position.

The idea behind Eagle Financial Services and Eagle 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.