Correlation Between FS Bancorp and Northeast Community
Can any of the company-specific risk be diversified away by investing in both FS Bancorp and Northeast Community 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 FS Bancorp and Northeast Community into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FS Bancorp and Northeast Community Bancorp, you can compare the effects of market volatilities on FS Bancorp and Northeast Community 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 FS Bancorp with a short position of Northeast Community. Check out your portfolio center. Please also check ongoing floating volatility patterns of FS Bancorp and Northeast Community.
Diversification Opportunities for FS Bancorp and Northeast Community
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FSBW and Northeast is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding FS Bancorp and Northeast Community Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northeast Community and FS Bancorp 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 FS Bancorp are associated (or correlated) with Northeast Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northeast Community has no effect on the direction of FS Bancorp i.e., FS Bancorp and Northeast Community go up and down completely randomly.
Pair Corralation between FS Bancorp and Northeast Community
Given the investment horizon of 90 days FS Bancorp is expected to generate 1.76 times less return on investment than Northeast Community. But when comparing it to its historical volatility, FS Bancorp is 1.05 times less risky than Northeast Community. It trades about 0.13 of its potential returns per unit of risk. Northeast Community Bancorp is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 2,682 in Northeast Community Bancorp on August 31, 2024 and sell it today you would earn a total of 326.00 from holding Northeast Community Bancorp or generate 12.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FS Bancorp vs. Northeast Community Bancorp
Performance |
| Timeline |
| FS Bancorp |
| Northeast Community |
FS Bancorp and Northeast Community Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FS Bancorp and Northeast Community
The main advantage of trading using opposite FS Bancorp and Northeast Community positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FS Bancorp position performs unexpectedly, Northeast Community 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 Northeast Community will offset losses from the drop in Northeast Community's long position.| FS Bancorp vs. First Community | FS Bancorp vs. Oak Valley Bancorp | FS Bancorp vs. First Financial Northwest | FS Bancorp vs. ESSA Bancorp |
| Northeast Community vs. Community West Bancshares | Northeast Community vs. First Financial Northwest | Northeast Community vs. First Capital | Northeast Community vs. HomeTrust Bancshares |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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