Correlation Between Eagle Bancorp and Washington Federal

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

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

Diversification Opportunities for Eagle Bancorp and Washington Federal

-0.79

Correlation Coefficient

Eagle Bancorp  Washington Federal

Pay attention - limited upside

The 3 months correlation between Eagle and Washington is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Bancorp and Washington Federal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Washington Federal 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 Washington Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Washington Federal has no effect on the direction of Eagle Bancorp i.e., Eagle Bancorp and Washington Federal go up and down completely randomly.

Pair Corralation between Eagle Bancorp and Washington Federal

Given the investment horizon of 90 days Eagle Bancorp is expected to generate 2.38 times more return on investment than Washington Federal. However, Eagle Bancorp is 2.38 times more volatile than Washington Federal. It trades about 0.07 of its potential returns per unit of risk. Washington Federal is currently generating about 0.11 per unit of risk. If you would invest  1,658  in Eagle Bancorp on September 19, 2024 and sell it today you would earn a total of  1,028  from holding Eagle Bancorp or generate 62.0% return on investment over 90 days.

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

Eagle Bancorp  vs.  Washington Federal

Eagle Bancorp

Risk-Adjusted Performance

6 of 100

OK

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.

Washington Federal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Washington Federal has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, Washington Federal is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Eagle Bancorp and Washington Federal

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

The idea behind Eagle Bancorp and Washington Federal 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.