Correlation Between First Northwest and Evans Bancorp
Can any of the company-specific risk be diversified away by investing in both First Northwest and Evans Bancorp 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 Evans Bancorp 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 Evans Bancorp, you can compare the effects of market volatilities on First Northwest and Evans Bancorp 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 Evans Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Northwest and Evans Bancorp.
Diversification Opportunities for First Northwest and Evans Bancorp
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between First and Evans is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding First Northwest Bancorp and Evans Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evans Bancorp 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 Evans Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evans Bancorp has no effect on the direction of First Northwest i.e., First Northwest and Evans Bancorp go up and down completely randomly.
Pair Corralation between First Northwest and Evans Bancorp
Given the investment horizon of 90 days First Northwest Bancorp is expected to generate 1.2 times more return on investment than Evans Bancorp. However, First Northwest is 1.2 times more volatile than Evans Bancorp. It trades about 0.0 of its potential returns per unit of risk. Evans Bancorp is currently generating about -0.08 per unit of risk. If you would invest 1,063 in First Northwest Bancorp on November 27, 2024 and sell it today you would lose (3.00) from holding First Northwest Bancorp or give up 0.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Northwest Bancorp vs. Evans Bancorp
Performance |
| Timeline |
| First Northwest Bancorp |
| Evans Bancorp |
First Northwest and Evans Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Northwest and Evans Bancorp
The main advantage of trading using opposite First Northwest and Evans Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Northwest position performs unexpectedly, Evans Bancorp 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 Evans Bancorp will offset losses from the drop in Evans Bancorp's long position.| First Northwest vs. Home Federal Bancorp | First Northwest vs. First Financial Northwest | First Northwest vs. First Capital | First Northwest vs. Community West Bancshares |
| Evans Bancorp vs. First Community | Evans Bancorp vs. Oak Valley Bancorp | Evans Bancorp vs. First Financial Northwest | Evans Bancorp vs. ESSA 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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