Correlation Between Fifth Third and Eagle Financial
Can any of the company-specific risk be diversified away by investing in both Fifth Third 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 Fifth Third and Eagle Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fifth Third Bancorp and Eagle Financial Services, you can compare the effects of market volatilities on Fifth Third 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 Fifth Third with a short position of Eagle Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fifth Third and Eagle Financial.
Diversification Opportunities for Fifth Third and Eagle Financial
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Fifth and Eagle is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Fifth Third Bancorp 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 Fifth Third 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 Fifth Third Bancorp 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 Fifth Third i.e., Fifth Third and Eagle Financial go up and down completely randomly.
Pair Corralation between Fifth Third and Eagle Financial
Given the investment horizon of 90 days Fifth Third Bancorp is expected to generate 3.1 times more return on investment than Eagle Financial. However, Fifth Third is 3.1 times more volatile than Eagle Financial Services. It trades about -0.01 of its potential returns per unit of risk. Eagle Financial Services is currently generating about -0.4 per unit of risk. If you would invest 3,665 in Fifth Third Bancorp on January 21, 2024 and sell it today you would lose (40.00) from holding Fifth Third Bancorp or give up 1.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fifth Third Bancorp vs. Eagle Financial Services
Performance |
| Timeline |
| Fifth Third Bancorp |
| Eagle Financial Services |
Fifth Third and Eagle Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fifth Third and Eagle Financial
The main advantage of trading using opposite Fifth Third and Eagle Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fifth Third 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 Fifth Third Bancorp 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.| Eagle Financial vs. Pfizer Inc | Eagle Financial vs. Heartland Financial USA | Eagle Financial vs. Conflux Network | Eagle Financial vs. Citigroup Capital XIII |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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