Correlation Between Northeast Community and FS Bancorp

Can any of the company-specific risk be diversified away by investing in both Northeast Community and FS 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 Northeast Community and FS Bancorp 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 FS Bancorp, you can compare the effects of market volatilities on Northeast Community and FS 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 Northeast Community with a short position of FS Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northeast Community and FS Bancorp.

Diversification Opportunities for Northeast Community and FS Bancorp

0.79

Correlation Coefficient

Northeast Community  FS Bancorp

Poor diversification

The 3 months correlation between Northeast and FSBW is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Northeast Community Bancorp and FS Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FS Bancorp 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 FS Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FS Bancorp has no effect on the direction of Northeast Community i.e., Northeast Community and FS Bancorp go up and down completely randomly.

Pair Corralation between Northeast Community and FS Bancorp

Given the investment horizon of 90 days Northeast Community Bancorp is expected to generate 0.78 times more return on investment than FS Bancorp. However, Northeast Community Bancorp is 1.29 times less risky than FS Bancorp. It trades about -0.04 of its potential returns per unit of risk. FS Bancorp is currently generating about -0.05 per unit of risk. If you would invest  2,436  in Northeast Community Bancorp on December 29, 2024 and sell it today you would lose (96.00) from holding Northeast Community Bancorp or give up 3.94% of portfolio value over 90 days.

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

Northeast Community Bancorp  vs.  FS Bancorp

Northeast Community

Risk-Adjusted Performance

Very Weak

Over the last 90 days Northeast Community Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Northeast Community is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

FS Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days FS Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental drivers remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Northeast Community and FS Bancorp

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

The idea behind Northeast Community Bancorp and FS 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.