Correlation Between Eagle Bancorp and Capital Bancorp

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Can any of the company-specific risk be diversified away by investing in both Eagle Bancorp and Capital 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 Capital Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eagle Bancorp Montana and Capital Bancorp, you can compare the effects of market volatilities on Eagle Bancorp and Capital 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 Capital Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Bancorp and Capital Bancorp.

Diversification Opportunities for Eagle Bancorp and Capital Bancorp

0.26
  Correlation Coefficient

Modest diversification

The 3 months correlation between Eagle and Capital is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Bancorp Montana and Capital Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital 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 Montana are associated (or correlated) with Capital Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Bancorp has no effect on the direction of Eagle Bancorp i.e., Eagle Bancorp and Capital Bancorp go up and down completely randomly.

Pair Corralation between Eagle Bancorp and Capital Bancorp

Given the investment horizon of 90 days Eagle Bancorp Montana is expected to under-perform the Capital Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, Eagle Bancorp Montana is 1.04 times less risky than Capital Bancorp. The stock trades about -0.52 of its potential returns per unit of risk. The Capital Bancorp is currently generating about -0.33 of returns per unit of risk over similar time horizon. If you would invest  3,082  in Capital Bancorp on October 12, 2024 and sell it today you would lose (327.00) from holding Capital Bancorp or give up 10.61% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Eagle Bancorp Montana  vs.  Capital Bancorp

 Performance 
       Timeline  
Eagle Bancorp Montana 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Eagle Bancorp Montana has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.
Capital Bancorp 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Capital Bancorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Capital Bancorp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Eagle Bancorp and Capital Bancorp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Eagle Bancorp and Capital Bancorp

The main advantage of trading using opposite Eagle Bancorp and Capital Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eagle Bancorp position performs unexpectedly, Capital 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 Capital Bancorp will offset losses from the drop in Capital Bancorp's long position.
The idea behind Eagle Bancorp Montana and Capital 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 Stocks Directory module to find actively traded stocks across global markets.

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