Correlation Between Northfield Bancorp and Banco De

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

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

Diversification Opportunities for Northfield Bancorp and Banco De

0.2

Correlation Coefficient

Northfield Bancorp  Banco De

Modest diversification

The 3 months correlation between Northfield and Banco is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Northfield Bancorp and Banco De Chile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco De Chile and Northfield 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 Northfield Bancorp are associated (or correlated) with Banco De. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco De Chile has no effect on the direction of Northfield Bancorp i.e., Northfield Bancorp and Banco De go up and down completely randomly.

Pair Corralation between Northfield Bancorp and Banco De

Given the investment horizon of 90 days Northfield Bancorp is expected to under-perform the Banco De. In addition to that, Northfield Bancorp is 1.42 times more volatile than Banco De Chile. It trades about -0.03 of its total potential returns per unit of risk. Banco De Chile is currently generating about 0.33 per unit of volatility. If you would invest  2,088  in Banco De Chile on December 29, 2024 and sell it today you would earn a total of  571.00  from holding Banco De Chile or generate 27.35% return on investment over 90 days.

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

Northfield Bancorp  vs.  Banco De Chile

Northfield Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Northfield Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, Northfield Bancorp is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Banco De Chile

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Banco De Chile are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, Banco De demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Northfield Bancorp and Banco De

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

The idea behind Northfield Bancorp and Banco De Chile 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.