Correlation Between Northeast Bancorp and Financial Institutions
Can any of the company-specific risk be diversified away by investing in both Northeast Bancorp and Financial Institutions 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 Financial Institutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northeast Bancorp and Financial Institutions, you can compare the effects of market volatilities on Northeast Bancorp and Financial Institutions 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 Financial Institutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northeast Bancorp and Financial Institutions.
Diversification Opportunities for Northeast Bancorp and Financial Institutions
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Northeast and Financial is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Northeast Bancorp and Financial Institutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Institutions 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 Financial Institutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Institutions has no effect on the direction of Northeast Bancorp i.e., Northeast Bancorp and Financial Institutions go up and down completely randomly.
Pair Corralation between Northeast Bancorp and Financial Institutions
Considering the 90-day investment horizon Northeast Bancorp is expected to generate 1.25 times less return on investment than Financial Institutions. But when comparing it to its historical volatility, Northeast Bancorp is 1.17 times less risky than Financial Institutions. It trades about 0.14 of its potential returns per unit of risk. Financial Institutions is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 2,447 in Financial Institutions on August 31, 2024 and sell it today you would earn a total of 269.00 from holding Financial Institutions or generate 10.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Northeast Bancorp vs. Financial Institutions
Performance |
| Timeline |
| Northeast Bancorp |
| Financial Institutions |
Northeast Bancorp and Financial Institutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northeast Bancorp and Financial Institutions
The main advantage of trading using opposite Northeast Bancorp and Financial Institutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northeast Bancorp position performs unexpectedly, Financial Institutions 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 Financial Institutions will offset losses from the drop in Financial Institutions' long position.| Northeast Bancorp vs. KeyCorp | Northeast Bancorp vs. Comerica | Northeast Bancorp vs. First Horizon National | Northeast Bancorp vs. Western Alliance Bancorporation |
| Financial Institutions vs. First Community | Financial Institutions vs. Community West Bancshares | Financial Institutions vs. First Financial Northwest | Financial Institutions vs. First Northwest 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
Other Complementary Tools
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Transaction History View history of all your transactions and understand their impact on performance |