Correlation Between First Financial and First Northwest
Can any of the company-specific risk be diversified away by investing in both First Financial 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 Financial 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 Financial Northwest and First Northwest Bancorp, you can compare the effects of market volatilities on First Financial 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 Financial with a short position of First Northwest. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Financial and First Northwest.
Diversification Opportunities for First Financial and First Northwest
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between First and First is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding First Financial Northwest 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 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 First Financial Northwest 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 Financial i.e., First Financial and First Northwest go up and down completely randomly.
Pair Corralation between First Financial and First Northwest
Given the investment horizon of 90 days First Financial Northwest is expected to generate 0.45 times more return on investment than First Northwest. However, First Financial Northwest is 2.2 times less risky than First Northwest. It trades about -0.06 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 2,264 in First Financial Northwest on November 2, 2024 and sell it today you would lose (128.00) from holding First Financial Northwest or give up 5.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Financial Northwest vs. First Northwest Bancorp
Performance |
| Timeline |
| First Financial Northwest |
| First Northwest Bancorp |
First Financial and First Northwest Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Financial and First Northwest
The main advantage of trading using opposite First Financial and First Northwest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Financial 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 Financial vs. Home Federal Bancorp | First Financial vs. Magyar Bancorp | First Financial vs. First Capital | First Financial vs. HomeTrust 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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