Correlation Between First Northwest and CNB

Can any of the company-specific risk be diversified away by investing in both First Northwest and CNB 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 CNB 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 CNB Corporation, you can compare the effects of market volatilities on First Northwest and CNB 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 CNB. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Northwest and CNB.

Diversification Opportunities for First Northwest and CNB

-0.37

Correlation Coefficient

First Northwest  CNB

Very good diversification

The 3 months correlation between First and CNB is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding First Northwest Bancorp and CNB Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNB Corporation 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 CNB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNB Corporation has no effect on the direction of First Northwest i.e., First Northwest and CNB go up and down completely randomly.

Pair Corralation between First Northwest and CNB

Given the investment horizon of 90 days First Northwest Bancorp is expected to under-perform the CNB. But the stock apears to be less risky and, when comparing its historical volatility, First Northwest Bancorp is 1.95 times less risky than CNB. The stock trades about -0.03 of its potential returns per unit of risk. The CNB Corporation is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,654  in CNB Corporation on October 4, 2024 and sell it today you would earn a total of  146.00  from holding CNB Corporation or generate 8.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	78.23%
Values	Daily Returns

First Northwest Bancorp  vs.  CNB Corp.

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.

CNB Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CNB Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, CNB is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Northwest and CNB

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

The idea behind First Northwest Bancorp and CNB Corporation 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.