Correlation Between Independent Bank and Eastern Bankshares
Can any of the company-specific risk be diversified away by investing in both Independent Bank 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 Independent Bank and Eastern Bankshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Independent Bank and Eastern Bankshares, you can compare the effects of market volatilities on Independent Bank 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 Independent Bank with a short position of Eastern Bankshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Independent Bank and Eastern Bankshares.
Diversification Opportunities for Independent Bank and Eastern Bankshares
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Independent and Eastern is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Independent Bank and Eastern Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern Bankshares and Independent Bank 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 Independent Bank 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 Independent Bank i.e., Independent Bank and Eastern Bankshares go up and down completely randomly.
Pair Corralation between Independent Bank and Eastern Bankshares
Given the investment horizon of 90 days Independent Bank is expected to generate 1.17 times more return on investment than Eastern Bankshares. However, Independent Bank is 1.17 times more volatile than Eastern Bankshares. It trades about 0.21 of its potential returns per unit of risk. Eastern Bankshares is currently generating about 0.21 per unit of risk. If you would invest 6,290 in Independent Bank on September 1, 2024 and sell it today you would earn a total of 1,009 from holding Independent Bank or generate 16.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Independent Bank vs. Eastern Bankshares
Performance |
| Timeline |
| Independent Bank |
| Eastern Bankshares |
Independent Bank and Eastern Bankshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Independent Bank and Eastern Bankshares
The main advantage of trading using opposite Independent Bank and Eastern Bankshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Independent Bank 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.| Independent Bank vs. Capitol Federal Financial | Independent Bank vs. BankFinancial | Independent Bank vs. Business First Bancshares | Independent Bank vs. First Bancorp |
| 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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