Correlation Between Eagle Bancorp and Bank of Marin

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

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

Diversification Opportunities for Eagle Bancorp and Bank of Marin

0.94

Correlation Coefficient

Eagle Bancorp  Bank of Marin

Almost no diversification

The 3 months correlation between Eagle and Bank is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Bancorp and Bank of Marin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Marin 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 Bank of Marin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Marin has no effect on the direction of Eagle Bancorp i.e., Eagle Bancorp and Bank of Marin go up and down completely randomly.

Pair Corralation between Eagle Bancorp and Bank of Marin

Given the investment horizon of 90 days Eagle Bancorp is expected to generate 1.06 times less return on investment than Bank of Marin. But when comparing it to its historical volatility, Eagle Bancorp is 1.09 times less risky than Bank of Marin. It trades about 0.21 of its potential returns per unit of risk. Bank of Marin is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,180  in Bank of Marin on September 3, 2024 and sell it today you would earn a total of  348.00  from holding Bank of Marin or generate 15.96% return on investment over 90 days.

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

Eagle Bancorp  vs.  Bank of Marin

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.

Bank of Marin

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Marin are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Bank of Marin exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eagle Bancorp and Bank of Marin

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

The idea behind Eagle Bancorp and Bank of Marin 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.