Correlation Between Eastern Bankshares and Community Bank
Can any of the company-specific risk be diversified away by investing in both Eastern Bankshares and Community Bank 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 Community Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastern Bankshares and Community Bank System, you can compare the effects of market volatilities on Eastern Bankshares and Community Bank 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 Community Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastern Bankshares and Community Bank.
Diversification Opportunities for Eastern Bankshares and Community Bank
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Eastern and Community is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Bankshares and Community Bank System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Bank System 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 Community Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Bank System has no effect on the direction of Eastern Bankshares i.e., Eastern Bankshares and Community Bank go up and down completely randomly.
Pair Corralation between Eastern Bankshares and Community Bank
Considering the 90-day investment horizon Eastern Bankshares is expected to generate 1.0 times more return on investment than Community Bank. However, Eastern Bankshares is 1.0 times more volatile than Community Bank System. It trades about -0.02 of its potential returns per unit of risk. Community Bank System is currently generating about -0.07 per unit of risk. If you would invest 1,845 in Eastern Bankshares on December 1, 2024 and sell it today you would lose (56.00) from holding Eastern Bankshares or give up 3.04% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Eastern Bankshares vs. Community Bank System
Performance |
Timeline |
Eastern Bankshares |
Community Bank System |
Eastern Bankshares and Community Bank Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Eastern Bankshares and Community Bank
The main advantage of trading using opposite Eastern Bankshares and Community Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastern Bankshares position performs unexpectedly, Community Bank 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 Community Bank will offset losses from the drop in Community Bank's long position.Eastern Bankshares vs. Western New England | Eastern Bankshares vs. Northeast Community Bancorp | Eastern Bankshares vs. Independent Bank | Eastern Bankshares vs. The First Bancshares, |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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