Correlation Between HMN Financial and First Northwest

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

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

Diversification Opportunities for HMN Financial and First Northwest

0.0

Correlation Coefficient

HMN Financial  First Northwest

Pay attention - limited upside

The 3 months correlation between HMN and First is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding HMN Financial and First Northwest Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Northwest Bancorp and HMN Financial 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 HMN Financial are associated (or correlated) with First Northwest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Northwest Bancorp has no effect on the direction of HMN Financial i.e., HMN Financial and First Northwest go up and down completely randomly.

Pair Corralation between HMN Financial and First Northwest

If you would invest  1,013  in First Northwest Bancorp on December 27, 2024 and sell it today you would earn a total of  7.00  from holding First Northwest Bancorp or generate 0.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

HMN Financial  vs.  First Northwest Bancorp

HMN Financial

Risk-Adjusted Performance

Very Weak

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

First Northwest Bancorp

Risk-Adjusted Performance

Very 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.

Pair Trading with HMN Financial and First Northwest

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

The idea behind HMN Financial and First Northwest Bancorp 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.