Correlation Between Eastern Bankshares and Cambridge Bancorp
Can any of the company-specific risk be diversified away by investing in both Eastern Bankshares and Cambridge Bancorp 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 Cambridge Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastern Bankshares and Cambridge Bancorp, you can compare the effects of market volatilities on Eastern Bankshares and Cambridge Bancorp 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 Cambridge Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastern Bankshares and Cambridge Bancorp.
Diversification Opportunities for Eastern Bankshares and Cambridge Bancorp
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Eastern and Cambridge is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Bankshares and Cambridge Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambridge Bancorp 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 Cambridge Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cambridge Bancorp has no effect on the direction of Eastern Bankshares i.e., Eastern Bankshares and Cambridge Bancorp go up and down completely randomly.
Pair Corralation between Eastern Bankshares and Cambridge Bancorp
If you would invest 1,679 in Eastern Bankshares on October 20, 2024 and sell it today you would earn a total of 71.00 from holding Eastern Bankshares or generate 4.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 5.0% |
| Values | Daily Returns |
Eastern Bankshares vs. Cambridge Bancorp
Performance |
| Timeline |
| Eastern Bankshares |
| Cambridge Bancorp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Eastern Bankshares and Cambridge Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastern Bankshares and Cambridge Bancorp
The main advantage of trading using opposite Eastern Bankshares and Cambridge Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastern Bankshares position performs unexpectedly, Cambridge Bancorp 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 Cambridge Bancorp will offset losses from the drop in Cambridge Bancorp'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, |
| Cambridge Bancorp vs. First Community | Cambridge Bancorp vs. Community West Bancshares | Cambridge Bancorp vs. First Financial Northwest | Cambridge Bancorp vs. First Northwest Bancorp |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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