Correlation Between Eagle Bancorp and CF Bankshares

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

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

Diversification Opportunities for Eagle Bancorp and CF Bankshares

0.88

Correlation Coefficient

Eagle Bancorp  CF Bankshares

Very poor diversification

The 3 months correlation between Eagle and CFBK is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Bancorp and CF Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Bankshares 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 CF Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Bankshares has no effect on the direction of Eagle Bancorp i.e., Eagle Bancorp and CF Bankshares go up and down completely randomly.

Pair Corralation between Eagle Bancorp and CF Bankshares

Given the investment horizon of 90 days Eagle Bancorp is expected to under-perform the CF Bankshares. In addition to that, Eagle Bancorp is 1.87 times more volatile than CF Bankshares. It trades about -0.23 of its total potential returns per unit of risk. CF Bankshares is currently generating about -0.09 per unit of volatility. If you would invest  2,444  in CF Bankshares on December 2, 2024 and sell it today you would lose (59.00) from holding CF Bankshares or give up 2.41% of portfolio value over 90 days.

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

Eagle Bancorp  vs.  CF Bankshares

Eagle Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eagle Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental drivers remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

CF Bankshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days CF Bankshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Eagle Bancorp and CF Bankshares

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

The idea behind Eagle Bancorp and CF Bankshares 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.