Correlation Between Liberty Northwest and WTB Financial

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

Diversification Opportunities for Liberty Northwest and WTB Financial

0.42

Correlation Coefficient

Liberty Northwest  WTB Financial

Very weak diversification

The 3 months correlation between Liberty and WTB is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Northwest Bancorp and WTB Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WTB Financial 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 WTB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WTB Financial has no effect on the direction of Liberty Northwest i.e., Liberty Northwest and WTB Financial go up and down completely randomly.

Pair Corralation between Liberty Northwest and WTB Financial

Given the investment horizon of 90 days Liberty Northwest is expected to generate 5.13 times less return on investment than WTB Financial. In addition to that, Liberty Northwest is 1.2 times more volatile than WTB Financial. It trades about 0.05 of its total potential returns per unit of risk. WTB Financial is currently generating about 0.32 per unit of volatility. If you would invest  28,922  in WTB Financial on September 5, 2024 and sell it today you would earn a total of  1,378  from holding WTB Financial or generate 4.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.91%
Values	Daily Returns

Liberty Northwest Bancorp  vs.  WTB Financial

Liberty Northwest Bancorp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Northwest Bancorp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Liberty Northwest is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

WTB Financial

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WTB Financial are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, WTB Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Liberty Northwest and WTB Financial

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

The idea behind Liberty Northwest Bancorp and WTB Financial 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.