Correlation Between First Capital and Brookline Bancorp

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

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

Diversification Opportunities for First Capital and Brookline Bancorp

-0.05

Correlation Coefficient

First Capital  Brookline Bancorp

Good diversification

The 3 months correlation between First and Brookline is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding First Capital and Brookline Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookline Bancorp and First Capital 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 First Capital are associated (or correlated) with Brookline Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookline Bancorp has no effect on the direction of First Capital i.e., First Capital and Brookline Bancorp go up and down completely randomly.

Pair Corralation between First Capital and Brookline Bancorp

Given the investment horizon of 90 days First Capital is expected to generate 10.36 times less return on investment than Brookline Bancorp. In addition to that, First Capital is 1.29 times more volatile than Brookline Bancorp. It trades about 0.01 of its total potential returns per unit of risk. Brookline Bancorp is currently generating about 0.19 per unit of volatility. If you would invest  999.00  in Brookline Bancorp on August 31, 2024 and sell it today you would earn a total of  275.00  from holding Brookline Bancorp or generate 27.53% return on investment over 90 days.

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

First Capital  vs.  Brookline Bancorp

First Capital

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Capital are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, First Capital is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Brookline Bancorp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Brookline Bancorp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, Brookline Bancorp disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Capital and Brookline Bancorp

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

The idea behind First Capital and Brookline Bancorp 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.