Correlation Between Fidelity and Finward Bancorp

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

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

Diversification Opportunities for Fidelity and Finward Bancorp

0.94

Correlation Coefficient

Fidelity  Finward Bancorp

Almost no diversification

The 3 months correlation between Fidelity and Finward is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity DD Bancorp and Finward Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finward Bancorp and Fidelity 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 Fidelity DD Bancorp 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 Fidelity i.e., Fidelity and Finward Bancorp go up and down completely randomly.

Pair Corralation between Fidelity and Finward Bancorp

Given the investment horizon of 90 days Fidelity DD Bancorp is expected to under-perform the Finward Bancorp. In addition to that, Fidelity is 1.87 times more volatile than Finward Bancorp. It trades about -0.11 of its total potential returns per unit of risk. Finward Bancorp is currently generating about -0.2 per unit of volatility. If you would invest  3,106  in Finward Bancorp on November 29, 2024 and sell it today you would lose (470.00) from holding Finward Bancorp or give up 15.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.33%
Values	Daily Returns

Fidelity DD Bancorp  vs.  Finward Bancorp

Fidelity DD Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity DD Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Fidelity and Finward Bancorp

The main advantage of trading using opposite Fidelity and Finward Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity 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 Fidelity DD Bancorp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.