Correlation Between Eagle Bancorp and Simmons First

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

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

Diversification Opportunities for Eagle Bancorp and Simmons First

0.94

Correlation Coefficient

Eagle Bancorp  Simmons First

Almost no diversification

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

Pair Corralation between Eagle Bancorp and Simmons First

Given the investment horizon of 90 days Eagle Bancorp is expected to under-perform the Simmons First. In addition to that, Eagle Bancorp is 1.63 times more volatile than Simmons First National. It trades about -0.23 of its total potential returns per unit of risk. Simmons First National is currently generating about -0.11 per unit of volatility. If you would invest  2,272  in Simmons First National on December 2, 2024 and sell it today you would lose (75.00) from holding Simmons First National or give up 3.3% 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.  Simmons First National

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.

Simmons First National

Risk-Adjusted Performance

Very Weak

Over the last 90 days Simmons First National has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Eagle Bancorp and Simmons First

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

The idea behind Eagle Bancorp and Simmons First National 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.