Correlation Between Eagle Bancorp and FVCBankcorp

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

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

Diversification Opportunities for Eagle Bancorp and FVCBankcorp

0.94

Correlation Coefficient

Eagle Bancorp  FVCBankcorp

Almost no diversification

The 3 months correlation between Eagle and FVCBankcorp is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Bancorp and FVCBankcorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FVCBankcorp 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 FVCBankcorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FVCBankcorp has no effect on the direction of Eagle Bancorp i.e., Eagle Bancorp and FVCBankcorp go up and down completely randomly.

Pair Corralation between Eagle Bancorp and FVCBankcorp

Given the investment horizon of 90 days Eagle Bancorp is expected to under-perform the FVCBankcorp. But the stock apears to be less risky and, when comparing its historical volatility, Eagle Bancorp is 1.51 times less risky than FVCBankcorp. The stock trades about -0.15 of its potential returns per unit of risk. The FVCBankcorp is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  1,266  in FVCBankcorp on December 30, 2024 and sell it today you would lose (200.00) from holding FVCBankcorp or give up 15.8% of portfolio value over 90 days.

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

Eagle Bancorp  vs.  FVCBankcorp

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.

FVCBankcorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days FVCBankcorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Eagle Bancorp and FVCBankcorp

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

The idea behind Eagle Bancorp and FVCBankcorp 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.