Correlation Between Northwest Bancshares and Fulton Financial

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

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

Diversification Opportunities for Northwest Bancshares and Fulton Financial

0.92

Correlation Coefficient

Northwest Bancshares  Fulton Financial

Almost no diversification

The 3 months correlation between Northwest and Fulton is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Northwest Bancshares and Fulton Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fulton Financial and Northwest Bancshares 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 Northwest Bancshares are associated (or correlated) with Fulton Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fulton Financial has no effect on the direction of Northwest Bancshares i.e., Northwest Bancshares and Fulton Financial go up and down completely randomly.

Pair Corralation between Northwest Bancshares and Fulton Financial

Given the investment horizon of 90 days Northwest Bancshares is expected to under-perform the Fulton Financial. But the stock apears to be less risky and, when comparing its historical volatility, Northwest Bancshares is 1.34 times less risky than Fulton Financial. The stock trades about -0.09 of its potential returns per unit of risk. The Fulton Financial is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,928  in Fulton Financial on December 30, 2024 and sell it today you would lose (131.00) from holding Fulton Financial or give up 6.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Northwest Bancshares  vs.  Fulton Financial

Northwest Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Northwest Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Fulton Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fulton Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Fulton Financial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Northwest Bancshares and Fulton Financial

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

The idea behind Northwest Bancshares and Fulton 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.