Correlation Between First Northern and Pacific Valley
Can any of the company-specific risk be diversified away by investing in both First Northern and Pacific Valley 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 Northern and Pacific Valley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Northern Community and Pacific Valley Bank, you can compare the effects of market volatilities on First Northern and Pacific Valley 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 Northern with a short position of Pacific Valley. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Northern and Pacific Valley.
Diversification Opportunities for First Northern and Pacific Valley
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between First and Pacific is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding First Northern Community and Pacific Valley Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Valley Bank and First Northern 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 Northern Community are associated (or correlated) with Pacific Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Valley Bank has no effect on the direction of First Northern i.e., First Northern and Pacific Valley go up and down completely randomly.
Pair Corralation between First Northern and Pacific Valley
Given the investment horizon of 90 days First Northern Community is expected to generate 0.74 times more return on investment than Pacific Valley. However, First Northern Community is 1.36 times less risky than Pacific Valley. It trades about 0.12 of its potential returns per unit of risk. Pacific Valley Bank is currently generating about 0.03 per unit of risk. If you would invest 828.00 in First Northern Community on August 25, 2024 and sell it today you would earn a total of 172.00 from holding First Northern Community or generate 20.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 92.02% |
| Values | Daily Returns |
First Northern Community vs. Pacific Valley Bank
Performance |
| Timeline |
| First Northern Community |
| Pacific Valley Bank |
First Northern and Pacific Valley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Northern and Pacific Valley
The main advantage of trading using opposite First Northern and Pacific Valley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Northern position performs unexpectedly, Pacific Valley 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 Pacific Valley will offset losses from the drop in Pacific Valley's long position.| First Northern vs. Community West Bancshares | First Northern vs. Home Bancorp | First Northern vs. CB Financial Services | First Northern vs. Civista Bancshares |
| Pacific Valley vs. Invesco High Income | Pacific Valley vs. Blackrock Muniholdings Ny | Pacific Valley vs. MFS Investment Grade | Pacific Valley vs. Federated Premier Municipal |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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