Correlation Between First Northwest and FVCBankcorp
Can any of the company-specific risk be diversified away by investing in both First Northwest and FVCBankcorp 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 FVCBankcorp 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 FVCBankcorp, you can compare the effects of market volatilities on First Northwest and FVCBankcorp 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 FVCBankcorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Northwest and FVCBankcorp.
Diversification Opportunities for First Northwest and FVCBankcorp
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and FVCBankcorp is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding First Northwest Bancorp and FVCBankcorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FVCBankcorp 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 FVCBankcorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FVCBankcorp has no effect on the direction of First Northwest i.e., First Northwest and FVCBankcorp go up and down completely randomly.
Pair Corralation between First Northwest and FVCBankcorp
Given the investment horizon of 90 days First Northwest Bancorp is expected to under-perform the FVCBankcorp. But the stock apears to be less risky and, when comparing its historical volatility, First Northwest Bancorp is 1.51 times less risky than FVCBankcorp. The stock trades about -0.02 of its potential returns per unit of risk. The FVCBankcorp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 1,379 in FVCBankcorp on November 2, 2024 and sell it today you would lose (142.00) from holding FVCBankcorp or give up 10.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Northwest Bancorp vs. FVCBankcorp
Performance |
| Timeline |
| First Northwest Bancorp |
| FVCBankcorp |
First Northwest and FVCBankcorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Northwest and FVCBankcorp
The main advantage of trading using opposite First Northwest and FVCBankcorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Northwest position performs unexpectedly, FVCBankcorp 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 FVCBankcorp will offset losses from the drop in FVCBankcorp'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 |
| FVCBankcorp vs. Home Federal Bancorp | FVCBankcorp vs. First Financial Northwest | FVCBankcorp vs. First Northwest Bancorp | FVCBankcorp vs. First Capital |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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