Correlation Between Sound Financial and Northfield Bancorp
Can any of the company-specific risk be diversified away by investing in both Sound Financial and Northfield 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 Sound Financial and Northfield Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sound Financial Bancorp and Northfield Bancorp, you can compare the effects of market volatilities on Sound Financial and Northfield 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 Sound Financial with a short position of Northfield Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sound Financial and Northfield Bancorp.
Diversification Opportunities for Sound Financial and Northfield Bancorp
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Sound and Northfield is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Sound Financial Bancorp and Northfield Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northfield Bancorp and Sound 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 Sound Financial Bancorp are associated (or correlated) with Northfield Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northfield Bancorp has no effect on the direction of Sound Financial i.e., Sound Financial and Northfield Bancorp go up and down completely randomly.
Pair Corralation between Sound Financial and Northfield Bancorp
Given the investment horizon of 90 days Sound Financial Bancorp is expected to under-perform the Northfield Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, Sound Financial Bancorp is 2.66 times less risky than Northfield Bancorp. The stock trades about -0.01 of its potential returns per unit of risk. The Northfield Bancorp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 1,186 in Northfield Bancorp on August 28, 2024 and sell it today you would earn a total of 201.00 from holding Northfield Bancorp or generate 16.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sound Financial Bancorp vs. Northfield Bancorp
Performance |
| Timeline |
| Sound Financial Bancorp |
| Northfield Bancorp |
Sound Financial and Northfield Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sound Financial and Northfield Bancorp
The main advantage of trading using opposite Sound Financial and Northfield Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sound Financial position performs unexpectedly, Northfield 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 Northfield Bancorp will offset losses from the drop in Northfield Bancorp's long position.| Sound Financial vs. Finward Bancorp | Sound Financial vs. Franklin Financial Services | Sound Financial vs. Community West Bancshares | Sound Financial vs. Home Federal Bancorp |
| Northfield Bancorp vs. Finward Bancorp | Northfield Bancorp vs. Community West Bancshares | Northfield Bancorp vs. First Financial Northwest | Northfield Bancorp vs. Home 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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