Correlation Between Eagle Financial and Washington Business

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

Diversification Opportunities for Eagle Financial and Washington Business

0.78

Correlation Coefficient

Eagle Financial  Washington Business

Poor diversification

The 3 months correlation between Eagle and Washington is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Financial Services and Washington Business Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Washington Business 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 Washington Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Washington Business Bank has no effect on the direction of Eagle Financial i.e., Eagle Financial and Washington Business go up and down completely randomly.

Pair Corralation between Eagle Financial and Washington Business

Given the investment horizon of 90 days Eagle Financial is expected to generate 1.6 times less return on investment than Washington Business. In addition to that, Eagle Financial is 1.11 times more volatile than Washington Business Bank. It trades about 0.11 of its total potential returns per unit of risk. Washington Business Bank is currently generating about 0.19 per unit of volatility. If you would invest  3,275  in Washington Business Bank on September 15, 2024 and sell it today you would earn a total of  325.00  from holding Washington Business Bank or generate 9.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	88.89%
Values	Daily Returns

Eagle Financial Services  vs.  Washington Business Bank

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.

Washington Business Bank

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Washington Business Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat fragile basic indicators, Washington Business may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Eagle Financial and Washington Business

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

The idea behind Eagle Financial Services and Washington Business Bank 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.