Correlation Between Eagle Financial and PSB Holdings

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

Diversification Opportunities for Eagle Financial and PSB Holdings

-0.26

Correlation Coefficient

Eagle Financial  PSB Holdings

Very good diversification

The 3 months correlation between Eagle and PSB is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Financial Services and PSB Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PSB Holdings 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 PSB Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PSB Holdings has no effect on the direction of Eagle Financial i.e., Eagle Financial and PSB Holdings go up and down completely randomly.

Pair Corralation between Eagle Financial and PSB Holdings

Given the investment horizon of 90 days Eagle Financial Services is expected to under-perform the PSB Holdings. In addition to that, Eagle Financial is 1.21 times more volatile than PSB Holdings. It trades about -0.28 of its total potential returns per unit of risk. PSB Holdings is currently generating about 0.0 per unit of volatility. If you would invest  2,592  in PSB Holdings on December 24, 2024 and sell it today you would lose (7.00) from holding PSB Holdings or give up 0.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	79.66%
Values	Daily Returns

Eagle Financial Services  vs.  PSB Holdings

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 fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

PSB Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days PSB Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, PSB Holdings is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Eagle Financial and PSB Holdings

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

The idea behind Eagle Financial Services and PSB Holdings 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 Stocks Directory module to find actively traded stocks across global markets.