Correlation Between First Business and Finward Bancorp
Can any of the company-specific risk be diversified away by investing in both First Business and Finward Bancorp 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 First Business and Finward Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Business Financial and Finward Bancorp, you can compare the effects of market volatilities on First Business and Finward Bancorp 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 First Business with a short position of Finward Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Business and Finward Bancorp.
Diversification Opportunities for First Business and Finward Bancorp
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between First and Finward is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding First Business Financial and Finward Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finward Bancorp and First Business 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 First Business Financial are associated (or correlated) with Finward Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finward Bancorp has no effect on the direction of First Business i.e., First Business and Finward Bancorp go up and down completely randomly.
Pair Corralation between First Business and Finward Bancorp
Given the investment horizon of 90 days First Business Financial is expected to generate 1.64 times more return on investment than Finward Bancorp. However, First Business is 1.64 times more volatile than Finward Bancorp. It trades about 0.09 of its potential returns per unit of risk. Finward Bancorp is currently generating about 0.04 per unit of risk. If you would invest 3,259 in First Business Financial on November 3, 2024 and sell it today you would earn a total of 1,907 from holding First Business Financial or generate 58.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Business Financial vs. Finward Bancorp
Performance |
| Timeline |
| First Business Financial |
| Finward Bancorp |
First Business and Finward Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Business and Finward Bancorp
The main advantage of trading using opposite First Business and Finward Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Business position performs unexpectedly, Finward Bancorp 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 Finward Bancorp will offset losses from the drop in Finward Bancorp's long position.| First Business vs. US Bancorp | First Business vs. Truist Financial Corp | First Business vs. Fifth Third Bancorp | First Business vs. KeyCorp |
| Finward Bancorp vs. US Bancorp | Finward Bancorp vs. Truist Financial Corp | Finward Bancorp vs. Fifth Third Bancorp | Finward Bancorp vs. KeyCorp |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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