Correlation Between Eagle Bancorp and Grupo Financiero

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

By analyzing existing cross correlation between Eagle Bancorp and Grupo Financiero Galicia, you can compare the effects of market volatilities on Eagle Bancorp and Grupo Financiero 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 Grupo Financiero. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Bancorp and Grupo Financiero.

Diversification Opportunities for Eagle Bancorp and Grupo Financiero

-0.67

Correlation Coefficient

Eagle Bancorp  Grupo Financiero

Excellent diversification

The 3 months correlation between Eagle and Grupo is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Bancorp and Grupo Financiero Galicia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Financiero Galicia 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 Grupo Financiero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Financiero Galicia has no effect on the direction of Eagle Bancorp i.e., Eagle Bancorp and Grupo Financiero go up and down completely randomly.

Pair Corralation between Eagle Bancorp and Grupo Financiero

Given the investment horizon of 90 days Eagle Bancorp is expected to under-perform the Grupo Financiero. But the stock apears to be less risky and, when comparing its historical volatility, Eagle Bancorp is 1.19 times less risky than Grupo Financiero. The stock trades about -0.04 of its potential returns per unit of risk. The Grupo Financiero Galicia is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,608  in Grupo Financiero Galicia on January 31, 2024 and sell it today you would earn a total of  1,518  from holding Grupo Financiero Galicia or generate 94.4% return on investment over 90 days.

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

Eagle Bancorp  vs.  Grupo Financiero Galicia

Eagle Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

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 May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Grupo Financiero Galicia

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Financiero Galicia are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile basic indicators, Grupo Financiero disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eagle Bancorp and Grupo Financiero

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

The idea behind Eagle Bancorp and Grupo Financiero Galicia 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.