Correlation Between Liberty Northwest and US Century

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

Diversification Opportunities for Liberty Northwest and US Century

0.34

Correlation Coefficient

Liberty Northwest  US Century

Weak diversification

The 3 months correlation between Liberty and USCB is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Northwest Bancorp and US Century Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Century Bank 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 US Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Century Bank has no effect on the direction of Liberty Northwest i.e., Liberty Northwest and US Century go up and down completely randomly.

Pair Corralation between Liberty Northwest and US Century

Given the investment horizon of 90 days Liberty Northwest Bancorp is expected to generate 0.74 times more return on investment than US Century. However, Liberty Northwest Bancorp is 1.35 times less risky than US Century. It trades about 0.01 of its potential returns per unit of risk. US Century Bank is currently generating about -0.02 per unit of risk. If you would invest  540.00  in Liberty Northwest Bancorp on December 2, 2024 and sell it today you would earn a total of  0.00  from holding Liberty Northwest Bancorp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.31%
Values	Daily Returns

Liberty Northwest Bancorp  vs.  US Century Bank

Liberty Northwest Bancorp

Risk-Adjusted Performance

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 recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

US Century Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days US Century Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, US Century is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Liberty Northwest and US Century

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

The idea behind Liberty Northwest Bancorp and US Century Bank 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.