Correlation Between Brookline Bancorp and Eagle Bancorp
Can any of the company-specific risk be diversified away by investing in both Brookline Bancorp and Eagle 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 Brookline Bancorp and Eagle Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brookline Bancorp and Eagle Bancorp Montana, you can compare the effects of market volatilities on Brookline Bancorp and Eagle 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 Brookline Bancorp with a short position of Eagle Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookline Bancorp and Eagle Bancorp.
Diversification Opportunities for Brookline Bancorp and Eagle Bancorp
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Brookline and Eagle is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Brookline Bancorp and Eagle Bancorp Montana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Bancorp Montana and Brookline Bancorp 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 Brookline Bancorp are associated (or correlated) with Eagle Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Bancorp Montana has no effect on the direction of Brookline Bancorp i.e., Brookline Bancorp and Eagle Bancorp go up and down completely randomly.
Pair Corralation between Brookline Bancorp and Eagle Bancorp
Given the investment horizon of 90 days Brookline Bancorp is expected to generate 2.39 times more return on investment than Eagle Bancorp. However, Brookline Bancorp is 2.39 times more volatile than Eagle Bancorp Montana. It trades about 0.03 of its potential returns per unit of risk. Eagle Bancorp Montana is currently generating about -0.01 per unit of risk. If you would invest 944.00 in Brookline Bancorp on January 26, 2024 and sell it today you would earn a total of 10.00 from holding Brookline Bancorp or generate 1.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Brookline Bancorp vs. Eagle Bancorp Montana
Performance |
| Timeline |
| Brookline Bancorp |
| Eagle Bancorp Montana |
Brookline Bancorp and Eagle Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brookline Bancorp and Eagle Bancorp
The main advantage of trading using opposite Brookline Bancorp and Eagle Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookline Bancorp position performs unexpectedly, Eagle 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 Eagle Bancorp will offset losses from the drop in Eagle Bancorp's long position.The idea behind Brookline Bancorp and Eagle Bancorp Montana pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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