Correlation Between First Northwest and Cadence Bancorp
Can any of the company-specific risk be diversified away by investing in both First Northwest and Cadence 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 First Northwest and Cadence Bancorp 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 Cadence Bancorp, you can compare the effects of market volatilities on First Northwest and Cadence 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 First Northwest with a short position of Cadence Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Northwest and Cadence Bancorp.
Diversification Opportunities for First Northwest and Cadence Bancorp
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and Cadence is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding First Northwest Bancorp and Cadence Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cadence Bancorp 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 Cadence Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cadence Bancorp has no effect on the direction of First Northwest i.e., First Northwest and Cadence Bancorp go up and down completely randomly.
Pair Corralation between First Northwest and Cadence Bancorp
Given the investment horizon of 90 days First Northwest Bancorp is expected to under-perform the Cadence Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, First Northwest Bancorp is 1.22 times less risky than Cadence Bancorp. The stock trades about -0.03 of its potential returns per unit of risk. The Cadence Bancorp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,259 in Cadence Bancorp on September 23, 2024 and sell it today you would earn a total of 1,149 from holding Cadence Bancorp or generate 50.86% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
First Northwest Bancorp vs. Cadence Bancorp
Performance |
Timeline |
First Northwest Bancorp |
Cadence Bancorp |
First Northwest and Cadence Bancorp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with First Northwest and Cadence Bancorp
The main advantage of trading using opposite First Northwest and Cadence Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Northwest position performs unexpectedly, Cadence 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 Cadence Bancorp will offset losses from the drop in Cadence Bancorp's long position.First Northwest vs. Home Federal Bancorp | First Northwest vs. Community West Bancshares | First Northwest vs. HomeTrust Bancshares | First Northwest vs. Lake Shore Bancorp |
Cadence Bancorp vs. Home Federal Bancorp | Cadence Bancorp vs. First Northwest Bancorp | Cadence Bancorp vs. Community West Bancshares | Cadence Bancorp vs. HomeTrust Bancshares |
Check out your portfolio center.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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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