Correlation Between First Northwest and Fifth Third
Can any of the company-specific risk be diversified away by investing in both First Northwest and Fifth Third 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 Fifth Third 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 Fifth Third Bancorp, you can compare the effects of market volatilities on First Northwest and Fifth Third 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 Fifth Third. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Northwest and Fifth Third.
Diversification Opportunities for First Northwest and Fifth Third
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between First and Fifth is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding First Northwest Bancorp and Fifth Third Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fifth Third 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 Fifth Third. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fifth Third Bancorp has no effect on the direction of First Northwest i.e., First Northwest and Fifth Third go up and down completely randomly.
Pair Corralation between First Northwest and Fifth Third
Given the investment horizon of 90 days First Northwest Bancorp is expected to under-perform the Fifth Third. But the stock apears to be less risky and, when comparing its historical volatility, First Northwest Bancorp is 1.04 times less risky than Fifth Third. The stock trades about -0.01 of its potential returns per unit of risk. The Fifth Third Bancorp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,014 in Fifth Third Bancorp on August 30, 2024 and sell it today you would earn a total of 1,802 from holding Fifth Third Bancorp or generate 59.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Northwest Bancorp vs. Fifth Third Bancorp
Performance |
| Timeline |
| First Northwest Bancorp |
| Fifth Third Bancorp |
First Northwest and Fifth Third Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Northwest and Fifth Third
The main advantage of trading using opposite First Northwest and Fifth Third positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Northwest position performs unexpectedly, Fifth Third 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 Fifth Third will offset losses from the drop in Fifth Third'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 |
| Fifth Third vs. KeyCorp | Fifth Third vs. Regions Financial | Fifth Third vs. Zions Bancorporation | Fifth Third vs. Huntington Bancshares Incorporated |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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