Correlation Between First Capital and First Northwest
Can any of the company-specific risk be diversified away by investing in both First Capital and First 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 First Capital and First Northwest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Capital and First Northwest Bancorp, you can compare the effects of market volatilities on First Capital and First 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 First Capital with a short position of First Northwest. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Capital and First Northwest.
Diversification Opportunities for First Capital and First Northwest
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and First is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding First Capital and First Northwest Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Northwest Bancorp and First Capital 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 Capital are associated (or correlated) with First Northwest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Northwest Bancorp has no effect on the direction of First Capital i.e., First Capital and First Northwest go up and down completely randomly.
Pair Corralation between First Capital and First Northwest
Given the investment horizon of 90 days First Capital is expected to generate 1.3 times more return on investment than First Northwest. However, First Capital is 1.3 times more volatile than First Northwest Bancorp. It trades about 0.03 of its potential returns per unit of risk. First Northwest Bancorp is currently generating about -0.03 per unit of risk. If you would invest 3,072 in First Capital on November 2, 2024 and sell it today you would earn a total of 104.00 from holding First Capital or generate 3.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Capital vs. First Northwest Bancorp
Performance |
| Timeline |
| First Capital |
| First Northwest Bancorp |
First Capital and First Northwest Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Capital and First Northwest
The main advantage of trading using opposite First Capital and First Northwest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Capital position performs unexpectedly, First 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 First Northwest will offset losses from the drop in First Northwest's long position.| First Capital vs. Home Federal Bancorp | First Capital vs. First Financial Northwest | First Capital vs. First Northwest Bancorp | First Capital vs. Community West Bancshares |
| First Northwest vs. Home Federal Bancorp | First Northwest vs. Magyar Bancorp | First Northwest vs. First Capital | First Northwest vs. HomeTrust Bancshares |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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