Correlation Between Liberty Northwest and Allient

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

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

Diversification Opportunities for Liberty Northwest and Allient

-0.14

Correlation Coefficient

Liberty Northwest  Allient

Good diversification

The 3 months correlation between Liberty and Allient is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Northwest Bancorp and Allient in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allient and Liberty 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 Liberty Northwest Bancorp are associated (or correlated) with Allient. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allient has no effect on the direction of Liberty Northwest i.e., Liberty Northwest and Allient go up and down completely randomly.

Pair Corralation between Liberty Northwest and Allient

Given the investment horizon of 90 days Liberty Northwest is expected to generate 6.26 times less return on investment than Allient. But when comparing it to its historical volatility, Liberty Northwest Bancorp is 1.28 times less risky than Allient. It trades about 0.03 of its potential returns per unit of risk. Allient is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,402  in Allient on October 25, 2024 and sell it today you would earn a total of  186.00  from holding Allient or generate 7.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.0%
Values	Daily Returns

Liberty Northwest Bancorp  vs.  Allient

Liberty Northwest Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liberty Northwest Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Liberty Northwest is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Allient

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Allient are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Allient unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Liberty Northwest and Allient

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

The idea behind Liberty Northwest Bancorp and Allient 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.