Correlation Between Eagle Bancorp and Byline Bancorp

Can any of the company-specific risk be diversified away by investing in both Eagle Bancorp and Byline 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 Byline 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 Byline Bancorp, you can compare the effects of market volatilities on Eagle Bancorp and Byline 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 Byline Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Bancorp and Byline Bancorp.

Diversification Opportunities for Eagle Bancorp and Byline Bancorp

0.4

Correlation Coefficient

Eagle Bancorp  Byline Bancorp

Very weak diversification

The 3 months correlation between Eagle and Byline is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Bancorp Montana and Byline Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Byline 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 Byline Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Byline Bancorp has no effect on the direction of Eagle Bancorp i.e., Eagle Bancorp and Byline Bancorp go up and down completely randomly.

Pair Corralation between Eagle Bancorp and Byline Bancorp

Given the investment horizon of 90 days Eagle Bancorp Montana is expected to under-perform the Byline Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, Eagle Bancorp Montana is 1.82 times less risky than Byline Bancorp. The stock trades about -0.01 of its potential returns per unit of risk. The Byline Bancorp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,124  in Byline Bancorp on February 11, 2024 and sell it today you would earn a total of  221.00  from holding Byline Bancorp or generate 10.4% return on investment over 90 days.

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

Eagle Bancorp Montana  vs.  Byline 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 comparatively stable primary indicators, Eagle Bancorp is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Byline Bancorp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Byline Bancorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Byline Bancorp may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Eagle Bancorp and Byline Bancorp

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

The idea behind Eagle Bancorp Montana and Byline 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.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.