Correlation Between Eagle Bancorp and First Western

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

Diversification Opportunities for Eagle Bancorp and First Western

0.84

Correlation Coefficient

Eagle Bancorp  First Western

Very poor diversification

The 3 months correlation between Eagle and First is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Bancorp Montana and First Western Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Western 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 First Western. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Western Financial has no effect on the direction of Eagle Bancorp i.e., Eagle Bancorp and First Western go up and down completely randomly.

Pair Corralation between Eagle Bancorp and First Western

Given the investment horizon of 90 days Eagle Bancorp Montana is expected to generate 0.78 times more return on investment than First Western. However, Eagle Bancorp Montana is 1.28 times less risky than First Western. It trades about 0.02 of its potential returns per unit of risk. First Western Financial is currently generating about -0.13 per unit of risk. If you would invest  1,520  in Eagle Bancorp Montana on October 24, 2024 and sell it today you would earn a total of  5.00  from holding Eagle Bancorp Montana or generate 0.33% 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.  First Western Financial

Eagle Bancorp Montana

Risk-Adjusted Performance

0 of 100

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.

First Western Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Western Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Eagle Bancorp and First Western

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

The idea behind Eagle Bancorp Montana and First Western 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.