Correlation Between Eagle Bancorp and Old Point

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

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

Diversification Opportunities for Eagle Bancorp and Old Point

0.89

Correlation Coefficient

Eagle Bancorp  Old Point

Very poor diversification

The 3 months correlation between Eagle and Old is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Bancorp and Old Point Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Point Financial 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 Old Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Point Financial has no effect on the direction of Eagle Bancorp i.e., Eagle Bancorp and Old Point go up and down completely randomly.

Pair Corralation between Eagle Bancorp and Old Point

Given the investment horizon of 90 days Eagle Bancorp is expected to generate 2.14 times more return on investment than Old Point. However, Eagle Bancorp is 2.14 times more volatile than Old Point Financial. It trades about 0.17 of its potential returns per unit of risk. Old Point Financial is currently generating about 0.2 per unit of risk. If you would invest  2,136  in Eagle Bancorp on September 1, 2024 and sell it today you would earn a total of  800.00  from holding Eagle Bancorp or generate 37.45% return on investment over 90 days.

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

Eagle Bancorp  vs.  Old Point Financial

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.

Old Point Financial

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Old Point Financial are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Old Point reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eagle Bancorp and Old Point

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

The idea behind Eagle Bancorp and Old Point Financial 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.