Correlation Between First Northwest and Bancorp 34

Can any of the company-specific risk be diversified away by investing in both First Northwest and Bancorp 34 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 First Northwest and Bancorp 34 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Northwest Bancorp and Bancorp 34, you can compare the effects of market volatilities on First Northwest and Bancorp 34 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 First Northwest with a short position of Bancorp 34. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Northwest and Bancorp 34.

Diversification Opportunities for First Northwest and Bancorp 34

0.18

Correlation Coefficient

First Northwest  Bancorp 34

Average diversification

The 3 months correlation between First and Bancorp is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding First Northwest Bancorp and Bancorp 34 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bancorp 34 and First Northwest 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 First Northwest Bancorp are associated (or correlated) with Bancorp 34. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bancorp 34 has no effect on the direction of First Northwest i.e., First Northwest and Bancorp 34 go up and down completely randomly.

Pair Corralation between First Northwest and Bancorp 34

Given the investment horizon of 90 days First Northwest Bancorp is expected to generate 2.02 times more return on investment than Bancorp 34. However, First Northwest is 2.02 times more volatile than Bancorp 34. It trades about -0.03 of its potential returns per unit of risk. Bancorp 34 is currently generating about -0.12 per unit of risk. If you would invest  1,459  in First Northwest Bancorp on September 30, 2024 and sell it today you would lose (440.00) from holding First Northwest Bancorp or give up 30.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	4.43%
Values	Daily Returns

First Northwest Bancorp  vs.  Bancorp 34

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.

Bancorp 34

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bancorp 34 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Bancorp 34 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with First Northwest and Bancorp 34

The main advantage of trading using opposite First Northwest and Bancorp 34 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Northwest position performs unexpectedly, Bancorp 34 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 Bancorp 34 will offset losses from the drop in Bancorp 34's long position.

The idea behind First Northwest Bancorp and Bancorp 34 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.