Correlation Between Alerus Financial and Finward Bancorp

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

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

Diversification Opportunities for Alerus Financial and Finward Bancorp

-0.33

Correlation Coefficient

Alerus Financial  Finward Bancorp

Very good diversification

The 3 months correlation between Alerus and Finward is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Alerus Financial Corp and Finward Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finward Bancorp and Alerus Financial 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 Alerus Financial Corp are associated (or correlated) with Finward Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finward Bancorp has no effect on the direction of Alerus Financial i.e., Alerus Financial and Finward Bancorp go up and down completely randomly.

Pair Corralation between Alerus Financial and Finward Bancorp

Given the investment horizon of 90 days Alerus Financial Corp is expected to under-perform the Finward Bancorp. In addition to that, Alerus Financial is 1.04 times more volatile than Finward Bancorp. It trades about -0.04 of its total potential returns per unit of risk. Finward Bancorp is currently generating about -0.01 per unit of volatility. If you would invest  2,924  in Finward Bancorp on December 21, 2024 and sell it today you would lose (30.00) from holding Finward Bancorp or give up 1.03% of portfolio value over 90 days.

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

Alerus Financial Corp  vs.  Finward Bancorp

Alerus Financial Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alerus Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Alerus Financial is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Finward Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Finward Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Finward Bancorp is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Alerus Financial and Finward Bancorp

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

The idea behind Alerus Financial Corp and Finward 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.