Correlation Between Brookline Bancorp and First United

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

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

Diversification Opportunities for Brookline Bancorp and First United

0.45

Correlation Coefficient

Brookline Bancorp  First United

Very weak diversification

The 3 months correlation between Brookline and First is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Brookline Bancorp and First United in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First United and Brookline 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 Brookline Bancorp are associated (or correlated) with First United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First United has no effect on the direction of Brookline Bancorp i.e., Brookline Bancorp and First United go up and down completely randomly.

Pair Corralation between Brookline Bancorp and First United

Given the investment horizon of 90 days Brookline Bancorp is expected to under-perform the First United. But the stock apears to be less risky and, when comparing its historical volatility, Brookline Bancorp is 1.55 times less risky than First United. The stock trades about -0.06 of its potential returns per unit of risk. The First United is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,540  in First United on November 29, 2024 and sell it today you would earn a total of  48.00  from holding First United or generate 1.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Brookline Bancorp  vs.  First United

Brookline Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brookline Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Brookline Bancorp is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

First United

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First United are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, First United is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Brookline Bancorp and First United

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

The idea behind Brookline Bancorp and First United 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.

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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.