Correlation Between Eagle Financial and Freedom Bank

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

Diversification Opportunities for Eagle Financial and Freedom Bank

-0.63

Correlation Coefficient

Eagle Financial  Freedom Bank

Excellent diversification

The 3 months correlation between Eagle and Freedom is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Financial Services and Freedom Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Bank 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 Freedom Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Bank has no effect on the direction of Eagle Financial i.e., Eagle Financial and Freedom Bank go up and down completely randomly.

Pair Corralation between Eagle Financial and Freedom Bank

Given the investment horizon of 90 days Eagle Financial Services is expected to generate 1.25 times more return on investment than Freedom Bank. However, Eagle Financial is 1.25 times more volatile than Freedom Bank of. It trades about 0.03 of its potential returns per unit of risk. Freedom Bank of is currently generating about -0.02 per unit of risk. If you would invest  3,215  in Eagle Financial Services on December 3, 2024 and sell it today you would earn a total of  55.00  from holding Eagle Financial Services or generate 1.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	71.25%
Values	Daily Returns

Eagle Financial Services  vs.  Freedom Bank of

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.

Freedom Bank

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Eagle Financial and Freedom Bank

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

The idea behind Eagle Financial Services and Freedom Bank of 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.