Correlation Between Northway Financial and Katahdin Bankshares
Can any of the company-specific risk be diversified away by investing in both Northway Financial and Katahdin Bankshares 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 Northway Financial and Katahdin Bankshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northway Financial and Katahdin Bankshares Corp, you can compare the effects of market volatilities on Northway Financial and Katahdin Bankshares 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 Northway Financial with a short position of Katahdin Bankshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northway Financial and Katahdin Bankshares.
Diversification Opportunities for Northway Financial and Katahdin Bankshares
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Northway and Katahdin is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Northway Financial and Katahdin Bankshares Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Katahdin Bankshares Corp and Northway Financial 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 Northway Financial are associated (or correlated) with Katahdin Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Katahdin Bankshares Corp has no effect on the direction of Northway Financial i.e., Northway Financial and Katahdin Bankshares go up and down completely randomly.
Pair Corralation between Northway Financial and Katahdin Bankshares
If you would invest 2,400 in Katahdin Bankshares Corp on August 28, 2024 and sell it today you would earn a total of 40.00 from holding Katahdin Bankshares Corp or generate 1.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 4.76% |
| Values | Daily Returns |
Northway Financial vs. Katahdin Bankshares Corp
Performance |
| Timeline |
| Northway Financial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Katahdin Bankshares Corp |
Northway Financial and Katahdin Bankshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northway Financial and Katahdin Bankshares
The main advantage of trading using opposite Northway Financial and Katahdin Bankshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northway Financial position performs unexpectedly, Katahdin Bankshares 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 Katahdin Bankshares will offset losses from the drop in Katahdin Bankshares' long position.| Northway Financial vs. Katahdin Bankshares Corp | Northway Financial vs. First Northern Community | Northway Financial vs. Pacific Financial Corp | Northway Financial vs. QNB Corp |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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