Correlation Between Eagle Bancorp and Amalgamated Bank

Can any of the company-specific risk be diversified away by investing in both Eagle Bancorp and Amalgamated 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 Bancorp and Amalgamated Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eagle Bancorp and Amalgamated Bank, you can compare the effects of market volatilities on Eagle Bancorp and Amalgamated 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 Bancorp with a short position of Amalgamated Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Bancorp and Amalgamated Bank.

Diversification Opportunities for Eagle Bancorp and Amalgamated Bank

0.92

Correlation Coefficient

Eagle Bancorp  Amalgamated Bank

Almost no diversification

The 3 months correlation between Eagle and Amalgamated is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Bancorp and Amalgamated Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amalgamated Bank and Eagle Bancorp 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 Bancorp are associated (or correlated) with Amalgamated Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amalgamated Bank has no effect on the direction of Eagle Bancorp i.e., Eagle Bancorp and Amalgamated Bank go up and down completely randomly.

Pair Corralation between Eagle Bancorp and Amalgamated Bank

Given the investment horizon of 90 days Eagle Bancorp is expected to generate 1.3 times more return on investment than Amalgamated Bank. However, Eagle Bancorp is 1.3 times more volatile than Amalgamated Bank. It trades about 0.12 of its potential returns per unit of risk. Amalgamated Bank is currently generating about 0.03 per unit of risk. If you would invest  2,459  in Eagle Bancorp on September 16, 2024 and sell it today you would earn a total of  447.00  from holding Eagle Bancorp or generate 18.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Eagle Bancorp  vs.  Amalgamated Bank

Eagle Bancorp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Bancorp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, Eagle Bancorp displayed solid returns over the last few months and may actually be approaching a breakup point.

Amalgamated Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Amalgamated Bank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Amalgamated Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Eagle Bancorp and Amalgamated Bank

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

The idea behind Eagle Bancorp and Amalgamated 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.