Correlation Between Eagle Bancorp and Enterprise Bancorp

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

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

Diversification Opportunities for Eagle Bancorp and Enterprise Bancorp

0.82

Correlation Coefficient

Eagle Bancorp  Enterprise Bancorp

Very poor diversification

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

Pair Corralation between Eagle Bancorp and Enterprise Bancorp

Given the investment horizon of 90 days Eagle Bancorp Montana is expected to generate 0.37 times more return on investment than Enterprise Bancorp. However, Eagle Bancorp Montana is 2.7 times less risky than Enterprise Bancorp. It trades about -0.18 of its potential returns per unit of risk. Enterprise Bancorp is currently generating about -0.14 per unit of risk. If you would invest  1,290  in Eagle Bancorp Montana on January 21, 2024 and sell it today you would lose (41.00) from holding Eagle Bancorp Montana or give up 3.18% of portfolio value over 90 days.

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

Eagle Bancorp Montana  vs.  Enterprise Bancorp

Eagle Bancorp Montana

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eagle Bancorp Montana has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in May 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Enterprise Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enterprise Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Eagle Bancorp and Enterprise Bancorp

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

The idea behind Eagle Bancorp Montana and Enterprise 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.