Correlation Between Eastern Bankshares and Heritage Commerce
Can any of the company-specific risk be diversified away by investing in both Eastern Bankshares and Heritage Commerce 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 Heritage Commerce into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastern Bankshares and Heritage Commerce Corp, you can compare the effects of market volatilities on Eastern Bankshares and Heritage Commerce 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 Heritage Commerce. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastern Bankshares and Heritage Commerce.
Diversification Opportunities for Eastern Bankshares and Heritage Commerce
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Eastern and Heritage is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Bankshares and Heritage Commerce Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage Commerce Corp 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 Heritage Commerce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heritage Commerce Corp has no effect on the direction of Eastern Bankshares i.e., Eastern Bankshares and Heritage Commerce go up and down completely randomly.
Pair Corralation between Eastern Bankshares and Heritage Commerce
Considering the 90-day investment horizon Eastern Bankshares is expected to generate 1.07 times more return on investment than Heritage Commerce. However, Eastern Bankshares is 1.07 times more volatile than Heritage Commerce Corp. It trades about 0.06 of its potential returns per unit of risk. Heritage Commerce Corp is currently generating about -0.01 per unit of risk. If you would invest 1,662 in Eastern Bankshares on November 2, 2024 and sell it today you would earn a total of 183.00 from holding Eastern Bankshares or generate 11.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eastern Bankshares vs. Heritage Commerce Corp
Performance |
| Timeline |
| Eastern Bankshares |
| Heritage Commerce Corp |
Eastern Bankshares and Heritage Commerce Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastern Bankshares and Heritage Commerce
The main advantage of trading using opposite Eastern Bankshares and Heritage Commerce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastern Bankshares position performs unexpectedly, Heritage Commerce 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 Heritage Commerce will offset losses from the drop in Heritage Commerce'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, |
| Heritage Commerce vs. Home Federal Bancorp | Heritage Commerce vs. First Financial Northwest | Heritage Commerce vs. First Northwest Bancorp | Heritage Commerce vs. First Capital |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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