Correlation Between First Financial and Western New
Can any of the company-specific risk be diversified away by investing in both First Financial and Western New 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 Western New 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 Western New England, you can compare the effects of market volatilities on First Financial and Western New 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 Western New. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Financial and Western New.
Diversification Opportunities for First Financial and Western New
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between First and Western is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding First Financial Northwest and Western New England in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western New England 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 Western New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western New England has no effect on the direction of First Financial i.e., First Financial and Western New go up and down completely randomly.
Pair Corralation between First Financial and Western New
Given the investment horizon of 90 days First Financial is expected to generate 15.12 times less return on investment than Western New. But when comparing it to its historical volatility, First Financial Northwest is 1.38 times less risky than Western New. It trades about 0.02 of its potential returns per unit of risk. Western New England is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 864.00 in Western New England on September 1, 2024 and sell it today you would earn a total of 74.00 from holding Western New England or generate 8.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Financial Northwest vs. Western New England
Performance |
| Timeline |
| First Financial Northwest |
| Western New England |
First Financial and Western New Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Financial and Western New
The main advantage of trading using opposite First Financial and Western New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Financial position performs unexpectedly, Western New 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 Western New will offset losses from the drop in Western New's long position.| First Financial vs. Home Federal Bancorp | First Financial vs. First Northwest Bancorp | First Financial vs. First Capital | First Financial vs. Community West Bancshares |
| Western New vs. IF Bancorp | Western New vs. Shore Bancshares | Western New vs. Colony Bankcorp | Western New vs. Investar Holding Corp |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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