Correlation Between Northeast Community and Home Federal

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

Diversification Opportunities for Northeast Community and Home Federal

0.29

Correlation Coefficient

Northeast Community  Home Federal

Modest diversification

The 3 months correlation between Northeast and Home is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Northeast Community Bancorp and Home Federal Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Federal 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 Home Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Federal Bancorp has no effect on the direction of Northeast Community i.e., Northeast Community and Home Federal go up and down completely randomly.

Pair Corralation between Northeast Community and Home Federal

Given the investment horizon of 90 days Northeast Community Bancorp is expected to generate 0.88 times more return on investment than Home Federal. However, Northeast Community Bancorp is 1.13 times less risky than Home Federal. It trades about 0.17 of its potential returns per unit of risk. Home Federal Bancorp is currently generating about 0.05 per unit of risk. If you would invest  2,211  in Northeast Community Bancorp on September 13, 2024 and sell it today you would earn a total of  607.00  from holding Northeast Community Bancorp or generate 27.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	92.19%
Values	Daily Returns

Northeast Community Bancorp  vs.  Home Federal Bancorp

Northeast Community

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Northeast Community Bancorp are ranked lower than 13 (%) 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.

Home Federal Bancorp

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Home Federal Bancorp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile fundamental drivers, Home Federal may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Northeast Community and Home Federal

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

The idea behind Northeast Community Bancorp and Home Federal 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.