Correlation Between Norwood Financial and BOK Financial

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

Diversification Opportunities for Norwood Financial and BOK Financial

0.86

Correlation Coefficient

Norwood Financial  BOK Financial

Very poor diversification

The 3 months correlation between Norwood and BOK is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Norwood Financial Corp and BOK Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BOK Financial 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 BOK Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BOK Financial has no effect on the direction of Norwood Financial i.e., Norwood Financial and BOK Financial go up and down completely randomly.

Pair Corralation between Norwood Financial and BOK Financial

Given the investment horizon of 90 days Norwood Financial Corp is expected to generate 1.12 times more return on investment than BOK Financial. However, Norwood Financial is 1.12 times more volatile than BOK Financial. It trades about 0.14 of its potential returns per unit of risk. BOK Financial is currently generating about 0.12 per unit of risk. If you would invest  2,535  in Norwood Financial Corp on September 4, 2024 and sell it today you would earn a total of  520.00  from holding Norwood Financial Corp or generate 20.51% return on investment over 90 days.

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

Norwood Financial Corp  vs.  BOK Financial

Norwood Financial Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Norwood Financial Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile technical and fundamental indicators, Norwood Financial disclosed solid returns over the last few months and may actually be approaching a breakup point.

BOK Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BOK Financial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating forward-looking signals, BOK Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Norwood Financial and BOK Financial

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

The idea behind Norwood Financial Corp and BOK 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.