Correlation Between Eagle Bancorp and First Horizon

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

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

Diversification Opportunities for Eagle Bancorp and First Horizon

0.67

Correlation Coefficient

Eagle Bancorp  First Horizon

Poor diversification

The 3 months correlation between Eagle and First is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Bancorp and First Horizon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Horizon 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 First Horizon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Horizon has no effect on the direction of Eagle Bancorp i.e., Eagle Bancorp and First Horizon go up and down completely randomly.

Pair Corralation between Eagle Bancorp and First Horizon

Given the investment horizon of 90 days Eagle Bancorp is expected to under-perform the First Horizon. In addition to that, Eagle Bancorp is 1.91 times more volatile than First Horizon. It trades about -0.14 of its total potential returns per unit of risk. First Horizon is currently generating about 0.0 per unit of volatility. If you would invest  1,853  in First Horizon on December 19, 2024 and sell it today you would lose (12.00) from holding First Horizon or give up 0.65% 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.  First Horizon

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.

First Horizon

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Horizon has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, First Horizon is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Eagle Bancorp and First Horizon

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

The idea behind Eagle Bancorp and First Horizon 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.