Correlation Between Colony Bankcorp and Liberty Northwest

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

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

Diversification Opportunities for Colony Bankcorp and Liberty Northwest

0.22

Correlation Coefficient

Colony Bankcorp  Liberty Northwest

Modest diversification

The 3 months correlation between Colony and Liberty is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Colony Bankcorp and Liberty Northwest Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Northwest Bancorp and Colony Bankcorp 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 Colony Bankcorp are associated (or correlated) with Liberty Northwest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Northwest Bancorp has no effect on the direction of Colony Bankcorp i.e., Colony Bankcorp and Liberty Northwest go up and down completely randomly.

Pair Corralation between Colony Bankcorp and Liberty Northwest

Given the investment horizon of 90 days Colony Bankcorp is expected to generate 1.64 times more return on investment than Liberty Northwest. However, Colony Bankcorp is 1.64 times more volatile than Liberty Northwest Bancorp. It trades about 0.04 of its potential returns per unit of risk. Liberty Northwest Bancorp is currently generating about -0.03 per unit of risk. If you would invest  1,191  in Colony Bankcorp on October 6, 2024 and sell it today you would earn a total of  391.00  from holding Colony Bankcorp or generate 32.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

Colony Bankcorp  vs.  Liberty Northwest Bancorp

Colony Bankcorp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Colony Bankcorp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Colony Bankcorp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Liberty Northwest Bancorp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Northwest Bancorp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Liberty Northwest is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Colony Bankcorp and Liberty Northwest

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

The idea behind Colony Bankcorp and Liberty 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 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.