Correlation Between DNB Financial and Eagle Financial

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

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

Diversification Opportunities for DNB Financial and Eagle Financial

0.0

Correlation Coefficient

DNB Financial  Eagle Financial

Pay attention - limited upside

The 3 months correlation between DNB and Eagle is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding DNB Financial 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 DNB Financial 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 DNB Financial 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 DNB Financial i.e., DNB Financial and Eagle Financial go up and down completely randomly.

Pair Corralation between DNB Financial and Eagle Financial

If you would invest (100.00) in DNB Financial on February 1, 2024 and sell it today you would earn a total of  100.00  from holding DNB Financial or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

DNB Financial  vs.  Eagle Financial Services

DNB Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DNB Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, DNB Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Eagle Financial Services

Risk-Adjusted Performance

0 of 100

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 recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with DNB Financial and Eagle Financial

The main advantage of trading using opposite DNB Financial and Eagle Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DNB Financial 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 DNB Financial 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.