Correlation Between Northeast Bancorp and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Northeast Bancorp and Dow Jones 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 Northeast Bancorp and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northeast Bancorp and Dow Jones Industrial, you can compare the effects of market volatilities on Northeast Bancorp and Dow Jones 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 Northeast Bancorp with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northeast Bancorp and Dow Jones.
Diversification Opportunities for Northeast Bancorp and Dow Jones
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Northeast and Dow is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Northeast Bancorp and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Northeast 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 Northeast Bancorp are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Northeast Bancorp i.e., Northeast Bancorp and Dow Jones go up and down completely randomly.
Pair Corralation between Northeast Bancorp and Dow Jones
Considering the 90-day investment horizon Northeast Bancorp is expected to generate 3.05 times more return on investment than Dow Jones. However, Northeast Bancorp is 3.05 times more volatile than Dow Jones Industrial. It trades about 0.21 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.26 per unit of risk. If you would invest 8,732 in Northeast Bancorp on August 29, 2024 and sell it today you would earn a total of 1,228 from holding Northeast Bancorp or generate 14.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northeast Bancorp vs. Dow Jones Industrial
Performance |
| Timeline |
Northeast Bancorp and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Northeast Bancorp
Pair trading matchups for Northeast Bancorp
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Northeast Bancorp and Dow Jones
The main advantage of trading using opposite Northeast Bancorp and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northeast Bancorp position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Northeast Bancorp vs. Home Federal Bancorp | Northeast Bancorp vs. Mainstreet Bank | Northeast Bancorp vs. Investar Holding Corp | Northeast Bancorp vs. Magyar Bancorp |
| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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