Correlation Between Northeast Bancorp and First Bancorp
Can any of the company-specific risk be diversified away by investing in both Northeast Bancorp and First 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 Northeast Bancorp and First Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northeast Bancorp and First Bancorp, you can compare the effects of market volatilities on Northeast Bancorp and First 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 Northeast Bancorp with a short position of First Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northeast Bancorp and First Bancorp.
Diversification Opportunities for Northeast Bancorp and First Bancorp
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Northeast and First is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Northeast Bancorp and First Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Bancorp 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 First Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Bancorp has no effect on the direction of Northeast Bancorp i.e., Northeast Bancorp and First Bancorp go up and down completely randomly.
Pair Corralation between Northeast Bancorp and First Bancorp
Considering the 90-day investment horizon Northeast Bancorp is expected to under-perform the First Bancorp. In addition to that, Northeast Bancorp is 1.19 times more volatile than First Bancorp. It trades about -0.11 of its total potential returns per unit of risk. First Bancorp is currently generating about -0.02 per unit of volatility. If you would invest 2,882 in First Bancorp on September 14, 2024 and sell it today you would lose (19.00) from holding First Bancorp or give up 0.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northeast Bancorp vs. First Bancorp
Performance |
| Timeline |
| Northeast Bancorp |
| First Bancorp |
Northeast Bancorp and First Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northeast Bancorp and First Bancorp
The main advantage of trading using opposite Northeast Bancorp and First Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northeast Bancorp position performs unexpectedly, First 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 First Bancorp will offset losses from the drop in First Bancorp's long position.| Northeast Bancorp vs. Home Federal Bancorp | Northeast Bancorp vs. Mainstreet Bank | Northeast Bancorp vs. Investar Holding Corp | Northeast Bancorp vs. Magyar Bancorp |
| First Bancorp vs. LINKBANCORP | First Bancorp vs. Bankwell Financial Group | First Bancorp vs. FS Bancorp | First Bancorp vs. Finward 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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