Correlation Between Eagle Bancorp and Penns Woods

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

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

Diversification Opportunities for Eagle Bancorp and Penns Woods

0.91

Correlation Coefficient

Eagle Bancorp  Penns Woods

Almost no diversification

The 3 months correlation between Eagle and Penns is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Bancorp and Penns Woods Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penns Woods 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 Penns Woods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penns Woods Bancorp has no effect on the direction of Eagle Bancorp i.e., Eagle Bancorp and Penns Woods go up and down completely randomly.

Pair Corralation between Eagle Bancorp and Penns Woods

Given the investment horizon of 90 days Eagle Bancorp is expected to under-perform the Penns Woods. In addition to that, Eagle Bancorp is 1.47 times more volatile than Penns Woods Bancorp. It trades about -0.14 of its total potential returns per unit of risk. Penns Woods Bancorp is currently generating about -0.04 per unit of volatility. If you would invest  3,005  in Penns Woods Bancorp on December 27, 2024 and sell it today you would lose (113.00) from holding Penns Woods Bancorp or give up 3.76% 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.  Penns Woods Bancorp

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.

Penns Woods Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Penns Woods Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Penns Woods is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Eagle Bancorp and Penns Woods

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

The idea behind Eagle Bancorp and Penns Woods 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 Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.