Correlation Between Eagle Financial and CB Financial

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

Diversification Opportunities for Eagle Financial and CB Financial

-0.05

Correlation Coefficient

Eagle Financial  CB Financial

Good diversification

The 3 months correlation between Eagle and CBFV is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Financial Services and CB Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CB Financial Services 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 CB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CB Financial Services has no effect on the direction of Eagle Financial i.e., Eagle Financial and CB Financial go up and down completely randomly.

Pair Corralation between Eagle Financial and CB Financial

Given the investment horizon of 90 days Eagle Financial Services is expected to under-perform the CB Financial. But the otc stock apears to be less risky and, when comparing its historical volatility, Eagle Financial Services is 1.9 times less risky than CB Financial. The otc stock trades about -0.24 of its potential returns per unit of risk. The CB Financial Services is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,844  in CB Financial Services on December 27, 2024 and sell it today you would earn a total of  64.00  from holding CB Financial Services or generate 2.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	78.33%
Values	Daily Returns

Eagle Financial Services  vs.  CB Financial Services

Eagle Financial Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eagle Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

CB Financial Services

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CB Financial Services are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable technical and fundamental indicators, CB Financial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Eagle Financial and CB Financial

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

The idea behind Eagle Financial Services and CB Financial Services 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.