Correlation Between Eagle Bancorp and IF Bancorp

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

Diversification Opportunities for Eagle Bancorp and IF Bancorp

0.67

Correlation Coefficient

Eagle Bancorp  IF Bancorp

Poor diversification

The 3 months correlation between Eagle and IROQ is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Bancorp Montana and IF Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IF 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 IF Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IF Bancorp has no effect on the direction of Eagle Bancorp i.e., Eagle Bancorp and IF Bancorp go up and down completely randomly.

Pair Corralation between Eagle Bancorp and IF Bancorp

Given the investment horizon of 90 days Eagle Bancorp is expected to generate 3.86 times less return on investment than IF Bancorp. But when comparing it to its historical volatility, Eagle Bancorp Montana is 1.21 times less risky than IF Bancorp. It trades about 0.01 of its potential returns per unit of risk. IF Bancorp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,696  in IF Bancorp on September 25, 2024 and sell it today you would earn a total of  634.00  from holding IF Bancorp or generate 37.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	92.54%
Values	Daily Returns

Eagle Bancorp Montana  vs.  IF Bancorp

Eagle Bancorp Montana

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Bancorp Montana are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, Eagle Bancorp is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

IF Bancorp

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IF Bancorp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, IF Bancorp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eagle Bancorp and IF Bancorp

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

The idea behind Eagle Bancorp Montana and IF 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.