Correlation Between Eastern Bankshares and Blue Ridge

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

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

Diversification Opportunities for Eastern Bankshares and Blue Ridge

0.56

Correlation Coefficient

Eastern Bankshares  Blue Ridge

Very weak diversification

The 3 months correlation between Eastern and Blue is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Bankshares and Blue Ridge Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Ridge Bankshares and Eastern Bankshares 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 Eastern Bankshares are associated (or correlated) with Blue Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Ridge Bankshares has no effect on the direction of Eastern Bankshares i.e., Eastern Bankshares and Blue Ridge go up and down completely randomly.

Pair Corralation between Eastern Bankshares and Blue Ridge

Considering the 90-day investment horizon Eastern Bankshares is expected to under-perform the Blue Ridge. In addition to that, Eastern Bankshares is 1.01 times more volatile than Blue Ridge Bankshares. It trades about -0.01 of its total potential returns per unit of risk. Blue Ridge Bankshares is currently generating about 0.05 per unit of volatility. If you would invest  319.00  in Blue Ridge Bankshares on December 28, 2024 and sell it today you would earn a total of  14.00  from holding Blue Ridge Bankshares or generate 4.39% return on investment over 90 days.

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

Eastern Bankshares  vs.  Blue Ridge Bankshares

Eastern Bankshares

Risk-Adjusted Performance

Very Weak

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

Blue Ridge Bankshares

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Ridge Bankshares are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, Blue Ridge is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Eastern Bankshares and Blue Ridge

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

The idea behind Eastern Bankshares and Blue Ridge 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.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.