Correlation Between William Penn and Northeast Bancorp
Can any of the company-specific risk be diversified away by investing in both William Penn and Northeast 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 William Penn and Northeast Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between William Penn Bancorp and Northeast Bancorp, you can compare the effects of market volatilities on William Penn and Northeast 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 William Penn with a short position of Northeast Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of William Penn and Northeast Bancorp.
Diversification Opportunities for William Penn and Northeast Bancorp
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between William and Northeast is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding William Penn Bancorp and Northeast Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northeast Bancorp and William Penn 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 William Penn Bancorp are associated (or correlated) with Northeast Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northeast Bancorp has no effect on the direction of William Penn i.e., William Penn and Northeast Bancorp go up and down completely randomly.
Pair Corralation between William Penn and Northeast Bancorp
Given the investment horizon of 90 days William Penn is expected to generate 4.89 times less return on investment than Northeast Bancorp. But when comparing it to its historical volatility, William Penn Bancorp is 1.44 times less risky than Northeast Bancorp. It trades about 0.03 of its potential returns per unit of risk. Northeast Bancorp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 4,062 in Northeast Bancorp on August 25, 2024 and sell it today you would earn a total of 6,078 from holding Northeast Bancorp or generate 149.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
William Penn Bancorp vs. Northeast Bancorp
Performance |
| Timeline |
| William Penn Bancorp |
| Northeast Bancorp |
William Penn and Northeast Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with William Penn and Northeast Bancorp
The main advantage of trading using opposite William Penn and Northeast Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if William Penn position performs unexpectedly, Northeast 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 Northeast Bancorp will offset losses from the drop in Northeast Bancorp's long position.| William Penn vs. Fifth Third Bancorp | William Penn vs. Zions Bancorporation | William Penn vs. Huntington Bancshares Incorporated | William Penn vs. PNC Financial Services |
| Northeast Bancorp vs. Fifth Third Bancorp | Northeast Bancorp vs. Zions Bancorporation | Northeast Bancorp vs. Huntington Bancshares Incorporated | Northeast Bancorp vs. PNC Financial Services |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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