Correlation Between Northeast Bancorp and Fifth Third

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

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

Diversification Opportunities for Northeast Bancorp and Fifth Third

0.92

Correlation Coefficient

Northeast Bancorp  Fifth Third

Almost no diversification

The 3 months correlation between Northeast and Fifth is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Northeast Bancorp and Fifth Third Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fifth Third Bancorp 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 Fifth Third. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fifth Third Bancorp has no effect on the direction of Northeast Bancorp i.e., Northeast Bancorp and Fifth Third go up and down completely randomly.

Pair Corralation between Northeast Bancorp and Fifth Third

Considering the 90-day investment horizon Northeast Bancorp is expected to generate 1.79 times more return on investment than Fifth Third. However, Northeast Bancorp is 1.79 times more volatile than Fifth Third Bancorp. It trades about -0.02 of its potential returns per unit of risk. Fifth Third Bancorp is currently generating about -0.17 per unit of risk. If you would invest  9,948  in Northeast Bancorp on September 16, 2024 and sell it today you would lose (98.00) from holding Northeast Bancorp or give up 0.99% of portfolio value over 90 days.

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

Northeast Bancorp  vs.  Fifth Third Bancorp

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.

Fifth Third Bancorp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fifth Third Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fifth Third may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Northeast Bancorp and Fifth Third

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

The idea behind Northeast Bancorp and Fifth Third Bancorp 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.