Correlation Between Norwood Financial and Bank First

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

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

Diversification Opportunities for Norwood Financial and Bank First

-0.25

Correlation Coefficient

Norwood Financial  Bank First

Very good diversification

The 3 months correlation between Norwood and Bank is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Norwood Financial Corp and Bank First National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank First National and Norwood Financial 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 Norwood Financial Corp are associated (or correlated) with Bank First. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank First National has no effect on the direction of Norwood Financial i.e., Norwood Financial and Bank First go up and down completely randomly.

Pair Corralation between Norwood Financial and Bank First

Given the investment horizon of 90 days Norwood Financial Corp is expected to under-perform the Bank First. In addition to that, Norwood Financial is 1.06 times more volatile than Bank First National. It trades about -0.07 of its total potential returns per unit of risk. Bank First National is currently generating about 0.06 per unit of volatility. If you would invest  9,824  in Bank First National on December 27, 2024 and sell it today you would earn a total of  490.00  from holding Bank First National or generate 4.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Norwood Financial Corp  vs.  Bank First National

Norwood Financial Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Norwood Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Bank First National

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bank First National are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Bank First is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Norwood Financial and Bank First

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

The idea behind Norwood Financial Corp and Bank First National 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.