Correlation Between First Northwest and WesBanco

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

Diversification Opportunities for First Northwest and WesBanco

0.46

Correlation Coefficient

First Northwest  WesBanco

Very weak diversification

The 3 months correlation between First and WesBanco is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding First Northwest Bancorp and WesBanco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WesBanco 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 WesBanco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WesBanco has no effect on the direction of First Northwest i.e., First Northwest and WesBanco go up and down completely randomly.

Pair Corralation between First Northwest and WesBanco

Given the investment horizon of 90 days First Northwest is expected to generate 3.58 times less return on investment than WesBanco. But when comparing it to its historical volatility, First Northwest Bancorp is 1.05 times less risky than WesBanco. It trades about 0.02 of its potential returns per unit of risk. WesBanco is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,898  in WesBanco on October 6, 2024 and sell it today you would earn a total of  306.00  from holding WesBanco or generate 10.56% 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.  WesBanco

First Northwest Bancorp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Northwest Bancorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

WesBanco

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WesBanco are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental drivers, WesBanco may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with First Northwest and WesBanco

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

The idea behind First Northwest Bancorp and WesBanco 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.