Correlation Between Liberty Northwest and Catalyst Bancorp

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

Diversification Opportunities for Liberty Northwest and Catalyst Bancorp

-0.15

Correlation Coefficient

Liberty Northwest  Catalyst Bancorp

Good diversification

The 3 months correlation between Liberty and Catalyst is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Northwest Bancorp and Catalyst Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Bancorp 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 Catalyst Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Bancorp has no effect on the direction of Liberty Northwest i.e., Liberty Northwest and Catalyst Bancorp go up and down completely randomly.

Pair Corralation between Liberty Northwest and Catalyst Bancorp

Given the investment horizon of 90 days Liberty Northwest Bancorp is expected to under-perform the Catalyst Bancorp. In addition to that, Liberty Northwest is 1.24 times more volatile than Catalyst Bancorp. It trades about -0.02 of its total potential returns per unit of risk. Catalyst Bancorp is currently generating about 0.04 per unit of volatility. If you would invest  1,147  in Catalyst Bancorp on October 20, 2024 and sell it today you would earn a total of  28.00  from holding Catalyst Bancorp or generate 2.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.38%
Values	Daily Returns

Liberty Northwest Bancorp  vs.  Catalyst Bancorp

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.

Catalyst Bancorp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Catalyst Bancorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Catalyst Bancorp is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Liberty Northwest and Catalyst Bancorp

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

The idea behind Liberty Northwest Bancorp and Catalyst 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.