Correlation Between First Northwest and Business First
Can any of the company-specific risk be diversified away by investing in both First Northwest and Business First 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 Northwest and Business First into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Northwest Bancorp and Business First Bancshares, you can compare the effects of market volatilities on First Northwest and Business First 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 Northwest with a short position of Business First. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Northwest and Business First.
Diversification Opportunities for First Northwest and Business First
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between First and Business is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding First Northwest Bancorp and Business First Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Business First Bancshares and First Northwest 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 Northwest Bancorp are associated (or correlated) with Business First. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Business First Bancshares has no effect on the direction of First Northwest i.e., First Northwest and Business First go up and down completely randomly.
Pair Corralation between First Northwest and Business First
Given the investment horizon of 90 days First Northwest Bancorp is expected to under-perform the Business First. But the stock apears to be less risky and, when comparing its historical volatility, First Northwest Bancorp is 1.23 times less risky than Business First. The stock trades about -0.01 of its potential returns per unit of risk. The Business First Bancshares is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,226 in Business First Bancshares on August 28, 2024 and sell it today you would earn a total of 669.00 from holding Business First Bancshares or generate 30.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Northwest Bancorp vs. Business First Bancshares
Performance |
| Timeline |
| First Northwest Bancorp |
| Business First Bancshares |
First Northwest and Business First Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Northwest and Business First
The main advantage of trading using opposite First Northwest and Business First positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Northwest position performs unexpectedly, Business First 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 Business First will offset losses from the drop in Business First's long position.| First Northwest vs. Fifth Third Bancorp | First Northwest vs. Zions Bancorporation | First Northwest vs. Huntington Bancshares Incorporated | First Northwest vs. Comerica |
| Business First vs. First Community | Business First vs. Community West Bancshares | Business First vs. First Financial Northwest | Business First vs. First Northwest Bancorp |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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