Correlation Between Eagle Bancorp and ECB Bancorp

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

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

Diversification Opportunities for Eagle Bancorp and ECB Bancorp

0.71

Correlation Coefficient

Eagle Bancorp  ECB Bancorp

Poor diversification

The 3 months correlation between Eagle and ECB is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Bancorp and ECB Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECB Bancorp 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 ECB Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECB Bancorp has no effect on the direction of Eagle Bancorp i.e., Eagle Bancorp and ECB Bancorp go up and down completely randomly.

Pair Corralation between Eagle Bancorp and ECB Bancorp

Given the investment horizon of 90 days Eagle Bancorp is expected to under-perform the ECB Bancorp. In addition to that, Eagle Bancorp is 1.36 times more volatile than ECB Bancorp. It trades about -0.35 of its total potential returns per unit of risk. ECB Bancorp is currently generating about -0.13 per unit of volatility. If you would invest  1,537  in ECB Bancorp on October 5, 2024 and sell it today you would lose (53.00) from holding ECB Bancorp or give up 3.45% of portfolio value over 90 days.

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

Eagle Bancorp  vs.  ECB Bancorp

Eagle Bancorp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Bancorp are ranked lower than 6 (%) 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.

ECB Bancorp

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ECB Bancorp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, ECB Bancorp is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Eagle Bancorp and ECB Bancorp

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

The idea behind Eagle Bancorp and ECB Bancorp 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.