Correlation Between Dow Jones and Northfield Bancorp
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Northfield 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 Dow Jones and Northfield Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Northfield Bancorp, you can compare the effects of market volatilities on Dow Jones and Northfield 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 Dow Jones with a short position of Northfield Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Northfield Bancorp.
Diversification Opportunities for Dow Jones and Northfield Bancorp
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dow and Northfield is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Northfield Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northfield Bancorp and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Northfield Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northfield Bancorp has no effect on the direction of Dow Jones i.e., Dow Jones and Northfield Bancorp go up and down completely randomly.
Pair Corralation between Dow Jones and Northfield Bancorp
Assuming the 90 days trading horizon Dow Jones is expected to generate 3.23 times less return on investment than Northfield Bancorp. But when comparing it to its historical volatility, Dow Jones Industrial is 4.21 times less risky than Northfield Bancorp. It trades about 0.16 of its potential returns per unit of risk. Northfield Bancorp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,147 in Northfield Bancorp on August 30, 2024 and sell it today you would earn a total of 196.00 from holding Northfield Bancorp or generate 17.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Northfield Bancorp
Performance |
| Timeline |
Dow Jones and Northfield Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Northfield Bancorp
Pair trading matchups for Northfield Bancorp
Pair Trading with Dow Jones and Northfield Bancorp
The main advantage of trading using opposite Dow Jones and Northfield Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Northfield 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 Northfield Bancorp will offset losses from the drop in Northfield Bancorp's long position.| Dow Jones vs. Skillful Craftsman Education | Dow Jones vs. Acco Brands | Dow Jones vs. Cracker Barrel Old | Dow Jones vs. Coursera |
| Northfield Bancorp vs. Finward Bancorp | Northfield Bancorp vs. Community West Bancshares | Northfield Bancorp vs. First Financial Northwest | Northfield Bancorp vs. Home Bancorp |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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