Correlation Between Home BancShares and Eagle Bancorp
Can any of the company-specific risk be diversified away by investing in both Home BancShares 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 BancShares 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 BancShares and Eagle Bancorp Montana, you can compare the effects of market volatilities on Home BancShares 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 BancShares with a short position of Eagle Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home BancShares and Eagle Bancorp.
Diversification Opportunities for Home BancShares and Eagle Bancorp
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Home and Eagle is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Home BancShares 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 Home BancShares 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 BancShares 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 Home BancShares i.e., Home BancShares and Eagle Bancorp go up and down completely randomly.
Pair Corralation between Home BancShares and Eagle Bancorp
Given the investment horizon of 90 days Home BancShares is expected to generate 0.98 times more return on investment than Eagle Bancorp. However, Home BancShares is 1.02 times less risky than Eagle Bancorp. It trades about 0.05 of its potential returns per unit of risk. Eagle Bancorp Montana is currently generating about 0.0 per unit of risk. If you would invest 2,059 in Home BancShares on January 25, 2024 and sell it today you would earn a total of 410.00 from holding Home BancShares or generate 19.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home BancShares vs. Eagle Bancorp Montana
Performance |
| Timeline |
| Home BancShares |
| Eagle Bancorp Montana |
Home BancShares and Eagle Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home BancShares and Eagle Bancorp
The main advantage of trading using opposite Home BancShares and Eagle Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home BancShares 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.| Home BancShares vs. HMN Financial | Home BancShares vs. Lake Shore Bancorp | Home BancShares vs. Rhinebeck Bancorp |
| 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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