Correlation Between First Mid and Eagle Bancorp

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

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

Diversification Opportunities for First Mid and Eagle Bancorp

0.82

Correlation Coefficient

First Mid  Eagle Bancorp

Very poor diversification

The 3 months correlation between First and Eagle is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding First Mid Illinois and Eagle Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Bancorp and First Mid 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 First Mid Illinois are associated (or correlated) with Eagle Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Bancorp has no effect on the direction of First Mid i.e., First Mid and Eagle Bancorp go up and down completely randomly.

Pair Corralation between First Mid and Eagle Bancorp

Given the investment horizon of 90 days First Mid Illinois is expected to generate 0.66 times more return on investment than Eagle Bancorp. However, First Mid Illinois is 1.52 times less risky than Eagle Bancorp. It trades about 0.04 of its potential returns per unit of risk. Eagle Bancorp is currently generating about 0.01 per unit of risk. If you would invest  3,224  in First Mid Illinois on October 5, 2024 and sell it today you would earn a total of  458.00  from holding First Mid Illinois or generate 14.21% return on investment over 90 days.

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

First Mid Illinois  vs.  Eagle Bancorp

First Mid Illinois

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Mid Illinois has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, First Mid is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

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.

Pair Trading with First Mid and Eagle Bancorp

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

The idea behind First Mid Illinois and Eagle 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.