Correlation Between Century Financial and First Northwest

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

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

Diversification Opportunities for Century Financial and First Northwest

0.27

Correlation Coefficient

Century Financial  First Northwest

Modest diversification

The 3 months correlation between Century and First is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Century Financial Corp 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 Century 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 Century Financial Corp 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 Century Financial i.e., Century Financial and First Northwest go up and down completely randomly.

Pair Corralation between Century Financial and First Northwest

Given the investment horizon of 90 days Century Financial Corp is expected to generate 1.53 times more return on investment than First Northwest. However, Century Financial is 1.53 times more volatile than First Northwest Bancorp. It trades about 0.05 of its potential returns per unit of risk. First Northwest Bancorp is currently generating about -0.03 per unit of risk. If you would invest  2,730  in Century Financial Corp on October 4, 2024 and sell it today you would earn a total of  1,110  from holding Century Financial Corp or generate 40.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	75.81%
Values	Daily Returns

Century Financial Corp  vs.  First Northwest Bancorp

Century Financial Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Century Financial Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Century Financial disclosed solid returns over the last few months and may actually be approaching a breakup point.

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 latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Century Financial and First Northwest

The main advantage of trading using opposite Century Financial and First Northwest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Financial 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 Century Financial Corp 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.