Correlation Between Cambridge Bancorp and Eastern Bankshares

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

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

Diversification Opportunities for Cambridge Bancorp and Eastern Bankshares

0.38

Correlation Coefficient

Cambridge Bancorp  Eastern Bankshares

Weak diversification

The 3 months correlation between Cambridge and Eastern is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Cambridge Bancorp and Eastern Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern Bankshares and Cambridge 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 Cambridge Bancorp are associated (or correlated) with Eastern Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern Bankshares has no effect on the direction of Cambridge Bancorp i.e., Cambridge Bancorp and Eastern Bankshares go up and down completely randomly.

Pair Corralation between Cambridge Bancorp and Eastern Bankshares

If you would invest  1,579  in Eastern Bankshares on September 12, 2024 and sell it today you would earn a total of  215.00  from holding Eastern Bankshares or generate 13.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

Cambridge Bancorp  vs.  Eastern Bankshares

Cambridge Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cambridge Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Cambridge Bancorp is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Eastern Bankshares

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eastern Bankshares are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental drivers, Eastern Bankshares exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cambridge Bancorp and Eastern Bankshares

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

The idea behind Cambridge Bancorp and Eastern Bankshares 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.