Can any of the company-specific risk be diversified away by investing in both Eagle Bancorp and Associated Banc 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 Associated Banc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eagle Bancorp and Associated Banc Corp, you can compare the effects of market volatilities on Eagle Bancorp and Associated Banc 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 Associated Banc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Bancorp and Associated Banc.
Diversification Opportunities for Eagle Bancorp and Associated Banc
The 3 months correlation between Eagle and Associated is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Bancorp and Associated Banc Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated Banc Corp 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 are associated (or correlated) with Associated Banc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated Banc Corp has no effect on the direction of Eagle Bancorp i.e., Eagle Bancorp and Associated Banc go up and down completely randomly.
Pair Corralation between Eagle Bancorp and Associated Banc
Given the investment horizon of 90 days Eagle Bancorp is expected to under-perform the Associated Banc. In addition to that, Eagle Bancorp is 1.38 times more volatile than Associated Banc Corp. It trades about -0.04 of its total potential returns per unit of risk. Associated Banc Corp is currently generating about 0.03 per unit of volatility. If you would invest 1,765 in Associated Banc Corp on March 6, 2024 and sell it today you would earn a total of 306.00 from holding Associated Banc Corp or generate 17.34% return on investment over 90 days.
Over the last 90 days Eagle Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental drivers remain very healthy which may send shares a bit higher in July 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.
Over the last 90 days Associated Banc Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Associated Banc is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.