Correlation Between Aquagold International and First Northwest

Can any of the company-specific risk be diversified away by investing in both Aquagold International and First Northwest 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 Aquagold International and First Northwest into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Aquagold International and First Northwest

0.0

Correlation Coefficient

Aquagold International  First Northwest

Pay attention - limited upside

The 3 months correlation between Aquagold and First is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Aquagold International and First Northwest Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Northwest Bancorp and Aquagold International 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 Aquagold International are associated (or correlated) with First Northwest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Northwest Bancorp has no effect on the direction of Aquagold International i.e., Aquagold International and First Northwest go up and down completely randomly.

Pair Corralation between Aquagold International and First Northwest

Given the investment horizon of 90 days Aquagold International is expected to generate 25.69 times more return on investment than First Northwest. However, Aquagold International is 25.69 times more volatile than First Northwest Bancorp. It trades about 0.06 of its potential returns per unit of risk. First Northwest Bancorp is currently generating about -0.01 per unit of risk. If you would invest  25.00  in Aquagold International on September 5, 2024 and sell it today you would lose (24.40) from holding Aquagold International or give up 97.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Aquagold International  vs.  First Northwest Bancorp

Aquagold International

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Aquagold International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Aquagold International is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

First Northwest Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Northwest Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, First Northwest is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aquagold International and First Northwest

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

The idea behind Aquagold International and First Northwest 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 Global Correlations module to find global opportunities by holding instruments from different markets.