Correlation Between Central Pacific and Liberty Northwest

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

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

Diversification Opportunities for Central Pacific and Liberty Northwest

0.06

Correlation Coefficient

Central Pacific  Liberty Northwest

Significant diversification

The 3 months correlation between Central and Liberty is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Central Pacific Financial 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 Central Pacific 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 Central Pacific Financial 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 Central Pacific i.e., Central Pacific and Liberty Northwest go up and down completely randomly.

Pair Corralation between Central Pacific and Liberty Northwest

Considering the 90-day investment horizon Central Pacific Financial is expected to under-perform the Liberty Northwest. In addition to that, Central Pacific is 1.23 times more volatile than Liberty Northwest Bancorp. It trades about -0.04 of its total potential returns per unit of risk. Liberty Northwest Bancorp is currently generating about 0.08 per unit of volatility. If you would invest  515.00  in Liberty Northwest Bancorp on December 26, 2024 and sell it today you would earn a total of  35.00  from holding Liberty Northwest Bancorp or generate 6.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Central Pacific Financial  vs.  Liberty Northwest Bancorp

Central Pacific Financial

Risk-Adjusted Performance

Very Weak

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

Liberty Northwest Bancorp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Northwest Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Liberty Northwest may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Central Pacific and Liberty Northwest

The main advantage of trading using opposite Central Pacific and Liberty Northwest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Pacific 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 Central Pacific Financial 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.