Correlation Between Katahdin Bankshares and Northway Financial

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

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

Diversification Opportunities for Katahdin Bankshares and Northway Financial

0.6

Correlation Coefficient

Katahdin Bankshares  Northway Financial

Poor diversification

The 3 months correlation between Katahdin and Northway is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Katahdin Bankshares Corp and Northway Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northway Financial and Katahdin Bankshares 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 Katahdin Bankshares Corp are associated (or correlated) with Northway Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northway Financial has no effect on the direction of Katahdin Bankshares i.e., Katahdin Bankshares and Northway Financial go up and down completely randomly.

Pair Corralation between Katahdin Bankshares and Northway Financial

If you would invest  2,200  in Katahdin Bankshares Corp on September 4, 2024 and sell it today you would earn a total of  256.00  from holding Katahdin Bankshares Corp or generate 11.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.59%
Values	Daily Returns

Katahdin Bankshares Corp  vs.  Northway Financial

Katahdin Bankshares Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Katahdin Bankshares Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical indicators, Katahdin Bankshares may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Northway Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Northway Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Northway Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Katahdin Bankshares and Northway Financial

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

The idea behind Katahdin Bankshares Corp and Northway Financial 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.