Correlation Between Finward Bancorp and National Bank

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

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

Diversification Opportunities for Finward Bancorp and National Bank

0.83

Correlation Coefficient

Finward Bancorp  National Bank

Very poor diversification

The 3 months correlation between Finward and National is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Finward Bancorp and National Bank Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank Holdings and Finward Bancorp 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 Finward Bancorp are associated (or correlated) with National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank Holdings has no effect on the direction of Finward Bancorp i.e., Finward Bancorp and National Bank go up and down completely randomly.

Pair Corralation between Finward Bancorp and National Bank

Given the investment horizon of 90 days Finward Bancorp is expected to under-perform the National Bank. But the stock apears to be less risky and, when comparing its historical volatility, Finward Bancorp is 1.06 times less risky than National Bank. The stock trades about -0.2 of its potential returns per unit of risk. The National Bank Holdings is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  4,774  in National Bank Holdings on November 29, 2024 and sell it today you would lose (596.00) from holding National Bank Holdings or give up 12.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Finward Bancorp  vs.  National Bank Holdings

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.

National Bank Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Bank Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical 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 Finward Bancorp and National Bank

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

The idea behind Finward Bancorp and National Bank Holdings 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.

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 Commodity Directory module to find actively traded commodities issued by global exchanges.