Correlation Between Western New and Northeast Community

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

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

Diversification Opportunities for Western New and Northeast Community

-0.12

Correlation Coefficient

Western New  Northeast Community

Good diversification

The 3 months correlation between Western and Northeast is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Western New England and Northeast Community Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northeast Community and Western New 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 Western New England are associated (or correlated) with Northeast Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northeast Community has no effect on the direction of Western New i.e., Western New and Northeast Community go up and down completely randomly.

Pair Corralation between Western New and Northeast Community

Given the investment horizon of 90 days Western New England is expected to generate 0.96 times more return on investment than Northeast Community. However, Western New England is 1.05 times less risky than Northeast Community. It trades about 0.03 of its potential returns per unit of risk. Northeast Community Bancorp is currently generating about -0.04 per unit of risk. If you would invest  913.00  in Western New England on December 30, 2024 and sell it today you would earn a total of  16.00  from holding Western New England or generate 1.75% return on investment over 90 days.

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

Western New England  vs.  Northeast Community Bancorp

Western New England

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Western New England are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Western New is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Western New and Northeast Community

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

The idea behind Western New England and Northeast Community 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.