Correlation Between Heritage Commerce and Eastern Bankshares
Can any of the company-specific risk be diversified away by investing in both Heritage Commerce and Eastern Bankshares 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 Heritage Commerce and Eastern Bankshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Heritage Commerce Corp and Eastern Bankshares, you can compare the effects of market volatilities on Heritage Commerce and Eastern Bankshares 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 Heritage Commerce with a short position of Eastern Bankshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heritage Commerce and Eastern Bankshares.
Diversification Opportunities for Heritage Commerce and Eastern Bankshares
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Heritage and Eastern is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Heritage Commerce Corp and Eastern Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern Bankshares and Heritage Commerce 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 Heritage Commerce Corp are associated (or correlated) with Eastern Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern Bankshares has no effect on the direction of Heritage Commerce i.e., Heritage Commerce and Eastern Bankshares go up and down completely randomly.
Pair Corralation between Heritage Commerce and Eastern Bankshares
Given the investment horizon of 90 days Heritage Commerce Corp is expected to under-perform the Eastern Bankshares. But the stock apears to be less risky and, when comparing its historical volatility, Heritage Commerce Corp is 1.35 times less risky than Eastern Bankshares. The stock trades about -0.17 of its potential returns per unit of risk. The Eastern Bankshares is currently generating about 0.14 of returns per unit of risk over similar time horizon. 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 | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Heritage Commerce Corp vs. Eastern Bankshares
Performance |
| Timeline |
| Heritage Commerce Corp |
| Eastern Bankshares |
Heritage Commerce and Eastern Bankshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Heritage Commerce and Eastern Bankshares
The main advantage of trading using opposite Heritage Commerce and Eastern Bankshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heritage Commerce position performs unexpectedly, Eastern Bankshares 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 Eastern Bankshares will offset losses from the drop in Eastern Bankshares' long position.| Heritage Commerce vs. Home Federal Bancorp | Heritage Commerce vs. First Financial Northwest | Heritage Commerce vs. First Northwest Bancorp | Heritage Commerce vs. First Capital |
| Eastern Bankshares vs. Western New England | Eastern Bankshares vs. Northeast Community Bancorp | Eastern Bankshares vs. Independent Bank | Eastern Bankshares vs. The First Bancshares, |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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