Correlation Between Community Trust and Eagle Bancorp

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

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

Diversification Opportunities for Community Trust and Eagle Bancorp

0.95

Correlation Coefficient

Community Trust  Eagle Bancorp

Almost no diversification

The 3 months correlation between Community and Eagle is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Community Trust Bancorp and Eagle Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Bancorp and Community Trust 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 Community Trust Bancorp 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 Community Trust i.e., Community Trust and Eagle Bancorp go up and down completely randomly.

Pair Corralation between Community Trust and Eagle Bancorp

Given the investment horizon of 90 days Community Trust Bancorp is expected to generate 0.6 times more return on investment than Eagle Bancorp. However, Community Trust Bancorp is 1.67 times less risky than Eagle Bancorp. It trades about 0.04 of its potential returns per unit of risk. Eagle Bancorp is currently generating about 0.0 per unit of risk. If you would invest  4,319  in Community Trust Bancorp on September 3, 2024 and sell it today you would earn a total of  1,579  from holding Community Trust Bancorp or generate 36.56% return on investment over 90 days.

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

Community Trust Bancorp  vs.  Eagle Bancorp

Community Trust Bancorp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Community Trust Bancorp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental drivers, Community Trust demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Eagle Bancorp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Bancorp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, Eagle Bancorp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Community Trust and Eagle Bancorp

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

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.