Correlation Between Eastern and Signature Bank

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

By analyzing existing cross correlation between Eastern Co and Signature Bank, you can compare the effects of market volatilities on Eastern and Signature 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 Eastern with a short position of Signature Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastern and Signature Bank.

Diversification Opportunities for Eastern and Signature Bank

0.66

Correlation Coefficient

Eastern  Signature Bank

Poor diversification

The 3 months correlation between Eastern and Signature is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Co and Signature Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Signature Bank and Eastern 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 Eastern Co are associated (or correlated) with Signature Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Signature Bank has no effect on the direction of Eastern i.e., Eastern and Signature Bank go up and down completely randomly.

Pair Corralation between Eastern and Signature Bank

If you would invest  1.70  in Signature Bank on September 27, 2024 and sell it today you would earn a total of  0.00  from holding Signature Bank or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.56%
Values	Daily Returns

Eastern Co  vs.  Signature Bank

Eastern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eastern Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's primary indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Signature Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Signature Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Signature Bank is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Eastern and Signature Bank

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

The idea behind Eastern Co and Signature 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.