Correlation Between Eagle Bancorp and FB Financial

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

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

Diversification Opportunities for Eagle Bancorp and FB Financial

-0.32

Correlation Coefficient

Eagle Bancorp  FB Financial

Very good diversification

The 3 months correlation between Eagle and FBK is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Bancorp Montana and FB Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FB Financial Corp 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 Montana are associated (or correlated) with FB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FB Financial Corp has no effect on the direction of Eagle Bancorp i.e., Eagle Bancorp and FB Financial go up and down completely randomly.

Pair Corralation between Eagle Bancorp and FB Financial

Given the investment horizon of 90 days Eagle Bancorp is expected to generate 1.65 times less return on investment than FB Financial. But when comparing it to its historical volatility, Eagle Bancorp Montana is 1.41 times less risky than FB Financial. It trades about 0.04 of its potential returns per unit of risk. FB Financial Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,864  in FB Financial Corp on January 12, 2025 and sell it today you would earn a total of  1,192  from holding FB Financial Corp or generate 41.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Eagle Bancorp Montana  vs.  FB Financial Corp

Eagle Bancorp Montana

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Bancorp Montana are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile primary indicators, Eagle Bancorp may actually be approaching a critical reversion point that can send shares even higher in May 2025.

FB Financial Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days FB Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in May 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Eagle Bancorp and FB Financial

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

The idea behind Eagle Bancorp Montana and FB Financial Corp 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.