Correlation Between Eagle Financial and Bank of Idaho

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

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

Diversification Opportunities for Eagle Financial and Bank of Idaho

0.48

Correlation Coefficient

Eagle Financial  Bank of Idaho

Very weak diversification

The 3 months correlation between Eagle and Bank is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Financial Services and Bank of Idaho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Idaho and Eagle Financial 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 Financial Services are associated (or correlated) with Bank of Idaho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Idaho has no effect on the direction of Eagle Financial i.e., Eagle Financial and Bank of Idaho go up and down completely randomly.

Pair Corralation between Eagle Financial and Bank of Idaho

Given the investment horizon of 90 days Eagle Financial is expected to generate 1.07 times less return on investment than Bank of Idaho. In addition to that, Eagle Financial is 1.3 times more volatile than Bank of Idaho. It trades about 0.11 of its total potential returns per unit of risk. Bank of Idaho is currently generating about 0.15 per unit of volatility. If you would invest  3,100  in Bank of Idaho on September 15, 2024 and sell it today you would earn a total of  235.00  from holding Bank of Idaho or generate 7.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.92%
Values	Daily Returns

Eagle Financial Services  vs.  Bank of Idaho

Eagle Financial Services

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Financial Services are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Eagle Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bank of Idaho

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Idaho are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile forward indicators, Bank of Idaho may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Eagle Financial and Bank of Idaho

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

The idea behind Eagle Financial Services and Bank of Idaho 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.