Correlation Between Eagle Bancorp and First Northwest

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

Diversification Opportunities for Eagle Bancorp and First Northwest

0.38

Correlation Coefficient

Eagle Bancorp  First Northwest

Weak diversification

The 3 months correlation between Eagle and First is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Bancorp and First Northwest Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Northwest 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 First Northwest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Northwest Bancorp has no effect on the direction of Eagle Bancorp i.e., Eagle Bancorp and First Northwest go up and down completely randomly.

Pair Corralation between Eagle Bancorp and First Northwest

Given the investment horizon of 90 days Eagle Bancorp is expected to under-perform the First Northwest. In addition to that, Eagle Bancorp is 1.51 times more volatile than First Northwest Bancorp. It trades about -0.35 of its total potential returns per unit of risk. First Northwest Bancorp is currently generating about -0.31 per unit of volatility. If you would invest  1,106  in First Northwest Bancorp on October 5, 2024 and sell it today you would lose (76.00) from holding First Northwest Bancorp or give up 6.87% of portfolio value over 90 days.

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

Eagle Bancorp  vs.  First Northwest 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.

First Northwest Bancorp

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Northwest Bancorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, First Northwest is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eagle Bancorp and First Northwest

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

The idea behind Eagle Bancorp and First Northwest 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.