Correlation Between Northeast Bancorp and BOK Financial

Can any of the company-specific risk be diversified away by investing in both Northeast Bancorp and BOK 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 Northeast Bancorp and BOK Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Northeast Bancorp and BOK Financial, you can compare the effects of market volatilities on Northeast Bancorp and BOK 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 Northeast Bancorp with a short position of BOK Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northeast Bancorp and BOK Financial.

Diversification Opportunities for Northeast Bancorp and BOK Financial

0.9

Correlation Coefficient

Northeast Bancorp  BOK Financial

Almost no diversification

The 3 months correlation between Northeast and BOK is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Northeast Bancorp and BOK Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BOK Financial and Northeast 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 Northeast Bancorp are associated (or correlated) with BOK Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BOK Financial has no effect on the direction of Northeast Bancorp i.e., Northeast Bancorp and BOK Financial go up and down completely randomly.

Pair Corralation between Northeast Bancorp and BOK Financial

Considering the 90-day investment horizon Northeast Bancorp is expected to generate 1.22 times more return on investment than BOK Financial. However, Northeast Bancorp is 1.22 times more volatile than BOK Financial. It trades about 0.21 of its potential returns per unit of risk. BOK Financial is currently generating about 0.13 per unit of risk. If you would invest  5,647  in Northeast Bancorp on September 15, 2024 and sell it today you would earn a total of  4,203  from holding Northeast Bancorp or generate 74.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Northeast Bancorp  vs.  BOK Financial

Northeast Bancorp

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Northeast Bancorp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental drivers, Northeast Bancorp displayed solid returns over the last few months and may actually be approaching a breakup point.

BOK Financial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BOK Financial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating forward-looking signals, BOK Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Northeast Bancorp and BOK Financial

The main advantage of trading using opposite Northeast Bancorp and BOK Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northeast Bancorp position performs unexpectedly, BOK 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 BOK Financial will offset losses from the drop in BOK Financial's long position.

The idea behind Northeast Bancorp and BOK Financial 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.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.