Correlation Between MT Bank and Eagle Financial

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Can any of the company-specific risk be diversified away by investing in both MT Bank and Eagle Financial 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 MT Bank and Eagle Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MT Bank Corp and Eagle Financial Services, you can compare the effects of market volatilities on MT Bank and Eagle Financial 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 MT Bank with a short position of Eagle Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of MT Bank and Eagle Financial.

Diversification Opportunities for MT Bank and Eagle Financial

0.22
  Correlation Coefficient

Modest diversification

The 3 months correlation between MTB and Eagle is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding MT Bank Corp and Eagle Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Financial Services and MT Bank 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 MT Bank Corp are associated (or correlated) with Eagle Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Financial Services has no effect on the direction of MT Bank i.e., MT Bank and Eagle Financial go up and down completely randomly.

Pair Corralation between MT Bank and Eagle Financial

Considering the 90-day investment horizon MT Bank Corp is expected to generate 0.96 times more return on investment than Eagle Financial. However, MT Bank Corp is 1.04 times less risky than Eagle Financial. It trades about 0.01 of its potential returns per unit of risk. Eagle Financial Services is currently generating about 0.0 per unit of risk. If you would invest  15,215  in MT Bank Corp on December 29, 2023 and sell it today you would lose (735.00) from holding MT Bank Corp or give up 4.83% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy84.21%
ValuesDaily Returns

MT Bank Corp  vs.  Eagle Financial Services

 Performance 
       Timeline  
MT Bank Corp 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in MT Bank Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, MT Bank may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Eagle Financial Services 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Eagle Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Eagle Financial is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

MT Bank and Eagle Financial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with MT Bank and Eagle Financial

The main advantage of trading using opposite MT Bank and Eagle Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MT Bank position performs unexpectedly, Eagle Financial 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 Financial will offset losses from the drop in Eagle Financial's long position.
The idea behind MT Bank Corp and Eagle Financial Services 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.
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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