Correlation Between Eagle Bancorp and US Bancorp

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

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

Diversification Opportunities for Eagle Bancorp and US Bancorp

-0.72

Correlation Coefficient

Eagle Bancorp  US Bancorp

Pay attention - limited upside

The 3 months correlation between Eagle and USB-PQ is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Bancorp and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp 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 US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of Eagle Bancorp i.e., Eagle Bancorp and US Bancorp go up and down completely randomly.

Pair Corralation between Eagle Bancorp and US Bancorp

Given the investment horizon of 90 days Eagle Bancorp is expected to generate 3.18 times more return on investment than US Bancorp. However, Eagle Bancorp is 3.18 times more volatile than US Bancorp. It trades about 0.17 of its potential returns per unit of risk. US Bancorp is currently generating about -0.02 per unit of risk. If you would invest  2,143  in Eagle Bancorp on September 13, 2024 and sell it today you would earn a total of  797.00  from holding Eagle Bancorp or generate 37.19% return on investment over 90 days.

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

Eagle Bancorp  vs.  US Bancorp

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.

US Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, US Bancorp is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Eagle Bancorp and US Bancorp

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

The idea behind Eagle Bancorp and US 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.

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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 Transaction History module to view history of all your transactions and understand their impact on performance.