Correlation Between Northfield Bancorp and Sound Financial
Can any of the company-specific risk be diversified away by investing in both Northfield Bancorp and Sound Financial 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 Northfield Bancorp and Sound Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northfield Bancorp and Sound Financial Bancorp, you can compare the effects of market volatilities on Northfield Bancorp and Sound Financial 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 Northfield Bancorp with a short position of Sound Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northfield Bancorp and Sound Financial.
Diversification Opportunities for Northfield Bancorp and Sound Financial
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Northfield and Sound is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Northfield Bancorp and Sound Financial Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sound Financial Bancorp and Northfield 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 Northfield Bancorp are associated (or correlated) with Sound Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sound Financial Bancorp has no effect on the direction of Northfield Bancorp i.e., Northfield Bancorp and Sound Financial go up and down completely randomly.
Pair Corralation between Northfield Bancorp and Sound Financial
Given the investment horizon of 90 days Northfield Bancorp is expected to generate 2.77 times more return on investment than Sound Financial. However, Northfield Bancorp is 2.77 times more volatile than Sound Financial Bancorp. It trades about 0.13 of its potential returns per unit of risk. Sound Financial Bancorp is currently generating about 0.01 per unit of risk. If you would invest 1,195 in Northfield Bancorp on August 24, 2024 and sell it today you would earn a total of 135.00 from holding Northfield Bancorp or generate 11.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northfield Bancorp vs. Sound Financial Bancorp
Performance |
| Timeline |
| Northfield Bancorp |
| Sound Financial Bancorp |
Northfield Bancorp and Sound Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northfield Bancorp and Sound Financial
The main advantage of trading using opposite Northfield Bancorp and Sound Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northfield Bancorp position performs unexpectedly, Sound Financial 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 Sound Financial will offset losses from the drop in Sound Financial's long position.| Northfield Bancorp vs. Finward Bancorp | Northfield Bancorp vs. Community West Bancshares | Northfield Bancorp vs. First Financial Northwest | Northfield Bancorp vs. Home Bancorp |
| Sound Financial vs. Finward Bancorp | Sound Financial vs. Franklin Financial Services | Sound Financial vs. Community West Bancshares | Sound Financial vs. Home Federal 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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