Correlation Between Northeast Community and Eastern Bankshares
Can any of the company-specific risk be diversified away by investing in both Northeast Community 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 Northeast Community and Eastern Bankshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northeast Community Bancorp and Eastern Bankshares, you can compare the effects of market volatilities on Northeast Community 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 Northeast Community with a short position of Eastern Bankshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northeast Community and Eastern Bankshares.
Diversification Opportunities for Northeast Community and Eastern Bankshares
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Northeast and Eastern is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Northeast Community Bancorp and Eastern Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern Bankshares and Northeast Community 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 Northeast Community Bancorp 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 Northeast Community i.e., Northeast Community and Eastern Bankshares go up and down completely randomly.
Pair Corralation between Northeast Community and Eastern Bankshares
Given the investment horizon of 90 days Northeast Community Bancorp is expected to generate 0.81 times more return on investment than Eastern Bankshares. However, Northeast Community Bancorp is 1.24 times less risky than Eastern Bankshares. It trades about 0.29 of its potential returns per unit of risk. Eastern Bankshares is currently generating about 0.21 per unit of risk. If you would invest 2,596 in Northeast Community Bancorp on September 1, 2024 and sell it today you would earn a total of 419.00 from holding Northeast Community Bancorp or generate 16.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northeast Community Bancorp vs. Eastern Bankshares
Performance |
| Timeline |
| Northeast Community |
| Eastern Bankshares |
Northeast Community and Eastern Bankshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northeast Community and Eastern Bankshares
The main advantage of trading using opposite Northeast Community and Eastern Bankshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northeast Community 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.| Northeast Community vs. Community West Bancshares | Northeast Community vs. First Financial Northwest | Northeast Community vs. First Capital | Northeast Community vs. HomeTrust Bancshares |
| 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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