Correlation Between First Northwest and First Capital
Can any of the company-specific risk be diversified away by investing in both First Northwest and First Capital 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 First Capital 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 First Capital, you can compare the effects of market volatilities on First Northwest and First Capital 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 First Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Northwest and First Capital.
Diversification Opportunities for First Northwest and First Capital
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between First and First is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding First Northwest Bancorp and First Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Capital 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 First Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Capital has no effect on the direction of First Northwest i.e., First Northwest and First Capital go up and down completely randomly.
Pair Corralation between First Northwest and First Capital
Given the investment horizon of 90 days First Northwest Bancorp is expected to under-perform the First Capital. But the stock apears to be less risky and, when comparing its historical volatility, First Northwest Bancorp is 1.13 times less risky than First Capital. The stock trades about -0.01 of its potential returns per unit of risk. The First Capital is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,312 in First Capital on August 23, 2024 and sell it today you would earn a total of 935.00 from holding First Capital or generate 40.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 98.39% |
| Values | Daily Returns |
First Northwest Bancorp vs. First Capital
Performance |
| Timeline |
| First Northwest Bancorp |
| First Capital |
First Northwest and First Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Northwest and First Capital
The main advantage of trading using opposite First Northwest and First Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Northwest position performs unexpectedly, First Capital 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 Capital will offset losses from the drop in First Capital'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 |
| First Capital vs. Home Federal Bancorp | First Capital vs. First Financial Northwest | First Capital vs. First Northwest Bancorp | First Capital vs. Community West 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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