Correlation Between Capitol Federal and Eagle Bancorp

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

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

Diversification Opportunities for Capitol Federal and Eagle Bancorp

0.85

Correlation Coefficient

Capitol Federal  Eagle Bancorp

Very poor diversification

The 3 months correlation between Capitol and Eagle is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Capitol Federal Financial and Eagle Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Bancorp and Capitol Federal 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 Capitol Federal Financial 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 Capitol Federal i.e., Capitol Federal and Eagle Bancorp go up and down completely randomly.

Pair Corralation between Capitol Federal and Eagle Bancorp

Given the investment horizon of 90 days Capitol Federal Financial is expected to generate 0.73 times more return on investment than Eagle Bancorp. However, Capitol Federal Financial is 1.37 times less risky than Eagle Bancorp. It trades about -0.01 of its potential returns per unit of risk. Eagle Bancorp is currently generating about -0.02 per unit of risk. If you would invest  727.00  in Capitol Federal Financial on October 20, 2024 and sell it today you would lose (155.00) from holding Capitol Federal Financial or give up 21.32% of portfolio value over 90 days.

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

Capitol Federal Financial  vs.  Eagle Bancorp

Capitol Federal Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capitol Federal Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Capitol Federal is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Eagle Bancorp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Bancorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, Eagle Bancorp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Capitol Federal and Eagle Bancorp

The main advantage of trading using opposite Capitol Federal and Eagle Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capitol Federal 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 Capitol Federal Financial 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.