Correlation Between Eastern Bankshares and Western New

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

By analyzing existing cross correlation between Eastern Bankshares and Western New England, you can compare the effects of market volatilities on Eastern Bankshares and Western New 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 Western New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastern Bankshares and Western New.

Diversification Opportunities for Eastern Bankshares and Western New

0.82

Correlation Coefficient

Eastern Bankshares  Western New

Very poor diversification

The 3 months correlation between Eastern and Western is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Bankshares and Western New England in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western New England 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 Western New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western New England has no effect on the direction of Eastern Bankshares i.e., Eastern Bankshares and Western New go up and down completely randomly.

Pair Corralation between Eastern Bankshares and Western New

Considering the 90-day investment horizon Eastern Bankshares is expected to generate 1.94 times more return on investment than Western New. However, Eastern Bankshares is 1.94 times more volatile than Western New England. It trades about 0.08 of its potential returns per unit of risk. Western New England is currently generating about 0.09 per unit of risk. If you would invest  1,673  in Eastern Bankshares on September 1, 2024 and sell it today you would earn a total of  191.00  from holding Eastern Bankshares or generate 11.42% return on investment over 90 days.

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

Eastern Bankshares  vs.  Western New England

Eastern Bankshares

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eastern Bankshares are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental drivers, Eastern Bankshares may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Western New England

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western New England are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Western New may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Eastern Bankshares and Western New

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

The idea behind Eastern Bankshares and Western New England 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.