Correlation Between Eagle Bancorp and First Financial
Can any of the company-specific risk be diversified away by investing in both Eagle Bancorp and First 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 Eagle Bancorp and First Financial 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 First Financial Bankshares, you can compare the effects of market volatilities on Eagle Bancorp and First 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 Eagle Bancorp with a short position of First Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Bancorp and First Financial.
Diversification Opportunities for Eagle Bancorp and First Financial
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Eagle and First is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Bancorp Montana and First Financial Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Financial Bank 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 First Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Financial Bank has no effect on the direction of Eagle Bancorp i.e., Eagle Bancorp and First Financial go up and down completely randomly.
Pair Corralation between Eagle Bancorp and First Financial
Given the investment horizon of 90 days Eagle Bancorp is expected to generate 1.05 times less return on investment than First Financial. But when comparing it to its historical volatility, Eagle Bancorp Montana is 2.09 times less risky than First Financial. It trades about 0.23 of its potential returns per unit of risk. First Financial Bankshares is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 3,598 in First Financial Bankshares on August 31, 2024 and sell it today you would earn a total of 605.00 from holding First Financial Bankshares or generate 16.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eagle Bancorp Montana vs. First Financial Bankshares
Performance |
| Timeline |
| Eagle Bancorp Montana |
| First Financial Bank |
Eagle Bancorp and First Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eagle Bancorp and First Financial
The main advantage of trading using opposite Eagle Bancorp and First Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eagle Bancorp position performs unexpectedly, First 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 First Financial will offset losses from the drop in First Financial's long position.| Eagle Bancorp vs. Home Federal Bancorp | Eagle Bancorp vs. First Financial Northwest | Eagle Bancorp vs. First Northwest Bancorp | Eagle Bancorp vs. First Capital |
| First Financial vs. BOK Financial | First Financial vs. Auburn National Bancorporation | First Financial vs. Great Southern Bancorp | First Financial vs. First Guaranty Bancshares |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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