Correlation Between National Bank and Brookline Bancorp

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

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

Diversification Opportunities for National Bank and Brookline Bancorp

0.88

Correlation Coefficient

National Bank  Brookline Bancorp

Very poor diversification

The 3 months correlation between National and Brookline is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding National Bank Holdings and Brookline Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookline Bancorp and National Bank 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 National Bank Holdings 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 National Bank i.e., National Bank and Brookline Bancorp go up and down completely randomly.

Pair Corralation between National Bank and Brookline Bancorp

Given the investment horizon of 90 days National Bank Holdings is expected to generate 0.99 times more return on investment than Brookline Bancorp. However, National Bank Holdings is 1.01 times less risky than Brookline Bancorp. It trades about 0.03 of its potential returns per unit of risk. Brookline Bancorp is currently generating about -0.01 per unit of risk. If you would invest  3,588  in National Bank Holdings on May 7, 2025 and sell it today you would earn a total of  62.00  from holding National Bank Holdings or generate 1.73% return on investment over 90 days.

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

National Bank Holdings  vs.  Brookline Bancorp

National Bank Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, National Bank is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Brookline Bancorp

Risk-Adjusted Performance

Weakest

Over the last 90 days Brookline Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Brookline Bancorp is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with National Bank and Brookline Bancorp

The main advantage of trading using opposite National Bank and Brookline Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank 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 National Bank Holdings 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.