Correlation Between Ford and Northfield Bancorp
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and Northfield Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Northfield Bancorp, you can compare the effects of market volatilities on Ford 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 Ford with a short position of Northfield Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Northfield Bancorp.
Diversification Opportunities for Ford and Northfield Bancorp
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ford and Northfield is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Northfield Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northfield Bancorp and Ford 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 Ford Motor 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 Ford i.e., Ford and Northfield Bancorp go up and down completely randomly.
Pair Corralation between Ford and Northfield Bancorp
Taking into account the 90-day investment horizon Ford is expected to generate 2.31 times less return on investment than Northfield Bancorp. But when comparing it to its historical volatility, Ford Motor is 1.17 times less risky than Northfield Bancorp. It trades about 0.03 of its potential returns per unit of risk. Northfield Bancorp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 970.00 in Northfield Bancorp on August 27, 2024 and sell it today you would earn a total of 408.00 from holding Northfield Bancorp or generate 42.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Northfield Bancorp
Performance |
| Timeline |
| Ford Motor |
| Northfield Bancorp |
Ford and Northfield Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Northfield Bancorp
The main advantage of trading using opposite Ford and Northfield Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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.The idea behind Ford Motor and Northfield 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.| 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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