Correlation Between NYSE Composite and Katahdin Bankshares

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Can any of the company-specific risk be diversified away by investing in both NYSE Composite 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 NYSE Composite and Katahdin Bankshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Katahdin Bankshares Corp, you can compare the effects of market volatilities on NYSE Composite 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 NYSE Composite with a short position of Katahdin Bankshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Katahdin Bankshares.

Diversification Opportunities for NYSE Composite and Katahdin Bankshares

0.67
  Correlation Coefficient

Poor diversification

The 3 months correlation between NYSE and Katahdin is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite 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 NYSE Composite 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 NYSE Composite 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 NYSE Composite i.e., NYSE Composite and Katahdin Bankshares go up and down completely randomly.
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Pair Corralation between NYSE Composite and Katahdin Bankshares

Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.6 times less return on investment than Katahdin Bankshares. But when comparing it to its historical volatility, NYSE Composite is 1.86 times less risky than Katahdin Bankshares. It trades about 0.15 of its potential returns per unit of risk. Katahdin Bankshares Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,051  in Katahdin Bankshares Corp on September 2, 2024 and sell it today you would earn a total of  405.00  from holding Katahdin Bankshares Corp or generate 19.75% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy94.44%
ValuesDaily Returns

NYSE Composite  vs.  Katahdin Bankshares Corp

 Performance 
       Timeline  

NYSE Composite and Katahdin Bankshares Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NYSE Composite and Katahdin Bankshares

The main advantage of trading using opposite NYSE Composite and Katahdin Bankshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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.
The idea behind NYSE Composite and Katahdin Bankshares Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.

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