Correlation Between Northeast Community and Bayfirst Financial

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

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

Diversification Opportunities for Northeast Community and Bayfirst Financial

0.17

Correlation Coefficient

Northeast Community  Bayfirst Financial

Average diversification

The 3 months correlation between Northeast and Bayfirst is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Northeast Community Bancorp and Bayfirst Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayfirst Financial Corp and Northeast Community 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 Community Bancorp are associated (or correlated) with Bayfirst Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayfirst Financial Corp has no effect on the direction of Northeast Community i.e., Northeast Community and Bayfirst Financial go up and down completely randomly.

Pair Corralation between Northeast Community and Bayfirst Financial

Given the investment horizon of 90 days Northeast Community Bancorp is expected to generate 1.17 times more return on investment than Bayfirst Financial. However, Northeast Community is 1.17 times more volatile than Bayfirst Financial Corp. It trades about 0.15 of its potential returns per unit of risk. Bayfirst Financial Corp is currently generating about 0.0 per unit of risk. If you would invest  2,223  in Northeast Community Bancorp on September 16, 2024 and sell it today you would earn a total of  536.00  from holding Northeast Community Bancorp or generate 24.11% return on investment over 90 days.

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

Northeast Community Bancorp  vs.  Bayfirst Financial Corp

Northeast Community

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Northeast Community Bancorp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, Northeast Community sustained solid returns over the last few months and may actually be approaching a breakup point.

Bayfirst Financial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bayfirst Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Bayfirst Financial is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Northeast Community and Bayfirst Financial

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

The idea behind Northeast Community Bancorp and Bayfirst Financial 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.