Correlation Between Brookline Bancorp and Macatawa Bank

Can any of the company-specific risk be diversified away by investing in both Brookline Bancorp and Macatawa Bank 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 Macatawa Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Brookline Bancorp and Macatawa Bank, you can compare the effects of market volatilities on Brookline Bancorp and Macatawa Bank 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 Macatawa Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookline Bancorp and Macatawa Bank.

Diversification Opportunities for Brookline Bancorp and Macatawa Bank

-0.71

Correlation Coefficient

Brookline Bancorp  Macatawa Bank

Pay attention - limited upside

The 3 months correlation between Brookline and Macatawa is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Brookline Bancorp and Macatawa Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macatawa Bank 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 Macatawa Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macatawa Bank has no effect on the direction of Brookline Bancorp i.e., Brookline Bancorp and Macatawa Bank go up and down completely randomly.

Pair Corralation between Brookline Bancorp and Macatawa Bank

Given the investment horizon of 90 days Brookline Bancorp is expected to generate 1.46 times more return on investment than Macatawa Bank. However, Brookline Bancorp is 1.46 times more volatile than Macatawa Bank. It trades about 0.18 of its potential returns per unit of risk. Macatawa Bank is currently generating about -0.03 per unit of risk. If you would invest  822.00  in Brookline Bancorp on February 29, 2024 and sell it today you would earn a total of  40.00  from holding Brookline Bancorp or generate 4.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Brookline Bancorp  vs.  Macatawa Bank

Brookline Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brookline Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Macatawa Bank

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Macatawa Bank are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, Macatawa Bank exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brookline Bancorp and Macatawa Bank

The main advantage of trading using opposite Brookline Bancorp and Macatawa Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookline Bancorp position performs unexpectedly, Macatawa Bank 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 Macatawa Bank will offset losses from the drop in Macatawa Bank's long position.

The idea behind Brookline Bancorp and Macatawa Bank 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.