Correlation Between Eagle Financial and Civista Bancshares

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

Diversification Opportunities for Eagle Financial and Civista Bancshares

0.34

Correlation Coefficient

Eagle Financial  Civista Bancshares

Weak diversification

The 3 months correlation between Eagle and Civista is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Financial Services and Civista Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Civista Bancshares 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 Civista Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Civista Bancshares has no effect on the direction of Eagle Financial i.e., Eagle Financial and Civista Bancshares go up and down completely randomly.

Pair Corralation between Eagle Financial and Civista Bancshares

Given the investment horizon of 90 days Eagle Financial Services is expected to under-perform the Civista Bancshares. But the otc stock apears to be less risky and, when comparing its historical volatility, Eagle Financial Services is 2.32 times less risky than Civista Bancshares. The otc stock trades about -0.24 of its potential returns per unit of risk. The Civista Bancshares is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  2,091  in Civista Bancshares on December 28, 2024 and sell it today you would lose (99.00) from holding Civista Bancshares or give up 4.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	78.33%
Values	Daily Returns

Eagle Financial Services  vs.  Civista Bancshares

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.

Civista Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Civista Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Civista Bancshares is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eagle Financial and Civista Bancshares

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

The idea behind Eagle Financial Services and Civista Bancshares 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.