Correlation Between Fifth Third and Eagle Bancorp
Can any of the company-specific risk be diversified away by investing in both Fifth Third 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 Fifth Third and Eagle Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fifth Third Bancorp and Eagle Bancorp Montana, you can compare the effects of market volatilities on Fifth Third 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 Fifth Third with a short position of Eagle Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fifth Third and Eagle Bancorp.
Diversification Opportunities for Fifth Third and Eagle Bancorp
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fifth and Eagle is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Fifth Third Bancorp and Eagle Bancorp Montana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Bancorp Montana and Fifth Third 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 Fifth Third 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 Montana has no effect on the direction of Fifth Third i.e., Fifth Third and Eagle Bancorp go up and down completely randomly.
Pair Corralation between Fifth Third and Eagle Bancorp
Given the investment horizon of 90 days Fifth Third Bancorp is expected to generate 2.52 times more return on investment than Eagle Bancorp. However, Fifth Third is 2.52 times more volatile than Eagle Bancorp Montana. It trades about 0.05 of its potential returns per unit of risk. Eagle Bancorp Montana is currently generating about -0.18 per unit of risk. If you would invest 3,590 in Fifth Third Bancorp on January 23, 2024 and sell it today you would earn a total of 65.00 from holding Fifth Third Bancorp or generate 1.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fifth Third Bancorp vs. Eagle Bancorp Montana
Performance |
| Timeline |
| Fifth Third Bancorp |
| Eagle Bancorp Montana |
Fifth Third and Eagle Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fifth Third and Eagle Bancorp
The main advantage of trading using opposite Fifth Third and Eagle Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fifth Third 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 Fifth Third Bancorp and Eagle Bancorp Montana 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.| Eagle Bancorp vs. HMN Financial | Eagle Bancorp vs. Lake Shore Bancorp | Eagle Bancorp vs. Rhinebeck Bancorp |
Check out your portfolio center.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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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