Correlation Between Home Federal and Eagle Bancorp

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

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

Diversification Opportunities for Home Federal and Eagle Bancorp

-0.08

Correlation Coefficient

Home Federal  Eagle Bancorp

Good diversification

The 3 months correlation between Home and Eagle is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and Eagle Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Bancorp and Home Federal 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 Home Federal Bancorp 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 Home Federal i.e., Home Federal and Eagle Bancorp go up and down completely randomly.

Pair Corralation between Home Federal and Eagle Bancorp

Given the investment horizon of 90 days Home Federal Bancorp is expected to generate 15.26 times more return on investment than Eagle Bancorp. However, Home Federal is 15.26 times more volatile than Eagle Bancorp. It trades about 0.04 of its potential returns per unit of risk. Eagle Bancorp is currently generating about -0.02 per unit of risk. If you would invest  1,615  in Home Federal Bancorp on October 12, 2024 and sell it today you would lose (319.00) from holding Home Federal Bancorp or give up 19.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.1%
Values	Daily Returns

Home Federal Bancorp  vs.  Eagle Bancorp

Home Federal Bancorp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Home Federal Bancorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Home Federal is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Eagle Bancorp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Bancorp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, Eagle Bancorp is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Home Federal and Eagle Bancorp

The main advantage of trading using opposite Home Federal and Eagle Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Federal 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 Home Federal Bancorp 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.