Correlation Between Comerica and Eagle Bancorp

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

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

Diversification Opportunities for Comerica and Eagle Bancorp

0.92

Correlation Coefficient

Comerica  Eagle Bancorp

Almost no diversification

The 3 months correlation between Comerica and Eagle is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Comerica and Eagle Bancorp Montana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Bancorp Montana and Comerica 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 Comerica 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 Montana has no effect on the direction of Comerica i.e., Comerica and Eagle Bancorp go up and down completely randomly.

Pair Corralation between Comerica and Eagle Bancorp

Considering the 90-day investment horizon Comerica is expected to generate 1.92 times more return on investment than Eagle Bancorp. However, Comerica is 1.92 times more volatile than Eagle Bancorp Montana. It trades about 0.11 of its potential returns per unit of risk. Eagle Bancorp Montana is currently generating about 0.14 per unit of risk. If you would invest  5,799  in Comerica on September 14, 2024 and sell it today you would earn a total of  848.00  from holding Comerica or generate 14.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Comerica  vs.  Eagle Bancorp Montana

Comerica

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Comerica are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting primary indicators, Comerica sustained solid returns over the last few months and may actually be approaching a breakup point.

Eagle Bancorp Montana

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Bancorp Montana are ranked lower than 11 (%) 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 January 2025.

Pair Trading with Comerica and Eagle Bancorp

The main advantage of trading using opposite Comerica and Eagle Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Comerica 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 Comerica and Eagle Bancorp Montana 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.

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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.