Correlation Between Pacific Financial and Northway Financial

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

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

Diversification Opportunities for Pacific Financial and Northway Financial

0.0

Correlation Coefficient

Pacific Financial  Northway Financial

Pay attention - limited upside

The 3 months correlation between Pacific and Northway is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Financial Corp and Northway Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northway Financial and Pacific 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 Pacific Financial Corp are associated (or correlated) with Northway Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northway Financial has no effect on the direction of Pacific Financial i.e., Pacific Financial and Northway Financial go up and down completely randomly.

Pair Corralation between Pacific Financial and Northway Financial

If you would invest (100.00) in Northway Financial on December 29, 2024 and sell it today you would earn a total of  100.00  from holding Northway Financial or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Pacific Financial Corp  vs.  Northway Financial

Pacific Financial Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pacific Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Northway Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Northway Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Northway Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Pacific Financial and Northway Financial

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

The idea behind Pacific Financial Corp and Northway 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.