Correlation Between Prime Meridian and Liberty Northwest

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

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

Diversification Opportunities for Prime Meridian and Liberty Northwest

-0.09

Correlation Coefficient

Prime Meridian  Liberty Northwest

Good diversification

The 3 months correlation between Prime and Liberty is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Prime Meridian Holding and Liberty Northwest Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Northwest Bancorp and Prime Meridian 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 Prime Meridian Holding are associated (or correlated) with Liberty Northwest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Northwest Bancorp has no effect on the direction of Prime Meridian i.e., Prime Meridian and Liberty Northwest go up and down completely randomly.

Pair Corralation between Prime Meridian and Liberty Northwest

Given the investment horizon of 90 days Prime Meridian Holding is expected to under-perform the Liberty Northwest. In addition to that, Prime Meridian is 1.32 times more volatile than Liberty Northwest Bancorp. It trades about -0.07 of its total potential returns per unit of risk. Liberty Northwest Bancorp is currently generating about 0.08 per unit of volatility. If you would invest  515.00  in Liberty Northwest Bancorp on December 28, 2024 and sell it today you would earn a total of  35.00  from holding Liberty Northwest Bancorp or generate 6.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Prime Meridian Holding  vs.  Liberty Northwest Bancorp

Prime Meridian Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Prime Meridian Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's technical indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Liberty Northwest Bancorp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Northwest Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Liberty Northwest may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Prime Meridian and Liberty Northwest

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

The idea behind Prime Meridian Holding and Liberty Northwest Bancorp 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.