Correlation Between Eagle Bancorp and Capitol Federal

Can any of the company-specific risk be diversified away by investing in both Eagle Bancorp and Capitol Federal 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 Capitol Federal 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 Capitol Federal Financial, you can compare the effects of market volatilities on Eagle Bancorp and Capitol Federal 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 Capitol Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Bancorp and Capitol Federal.

Diversification Opportunities for Eagle Bancorp and Capitol Federal

0.8

Correlation Coefficient

Eagle Bancorp  Capitol Federal

Very poor diversification

The 3 months correlation between Eagle and Capitol is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Bancorp Montana and Capitol Federal Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capitol Federal 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 Montana are associated (or correlated) with Capitol Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capitol Federal Financial has no effect on the direction of Eagle Bancorp i.e., Eagle Bancorp and Capitol Federal go up and down completely randomly.

Pair Corralation between Eagle Bancorp and Capitol Federal

Given the investment horizon of 90 days Eagle Bancorp Montana is expected to generate 0.5 times more return on investment than Capitol Federal. However, Eagle Bancorp Montana is 2.0 times less risky than Capitol Federal. It trades about 0.23 of its potential returns per unit of risk. Capitol Federal Financial is currently generating about 0.11 per unit of risk. If you would invest  1,486  in Eagle Bancorp Montana on August 31, 2024 and sell it today you would earn a total of  254.00  from holding Eagle Bancorp Montana or generate 17.09% return on investment over 90 days.

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

Eagle Bancorp Montana  vs.  Capitol Federal Financial

Eagle Bancorp Montana

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Bancorp Montana are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile primary indicators, Eagle Bancorp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Capitol Federal Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capitol Federal Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Capitol Federal displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eagle Bancorp and Capitol Federal

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

The idea behind Eagle Bancorp Montana and Capitol Federal 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.