Correlation Between First Northwest and Middlefield Banc
Can any of the company-specific risk be diversified away by investing in both First Northwest and Middlefield Banc 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 Middlefield Banc 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 Middlefield Banc, you can compare the effects of market volatilities on First Northwest and Middlefield Banc 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 Middlefield Banc. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Northwest and Middlefield Banc.
Diversification Opportunities for First Northwest and Middlefield Banc
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and Middlefield is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding First Northwest Bancorp and Middlefield Banc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Middlefield Banc 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 Middlefield Banc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Middlefield Banc has no effect on the direction of First Northwest i.e., First Northwest and Middlefield Banc go up and down completely randomly.
Pair Corralation between First Northwest and Middlefield Banc
Given the investment horizon of 90 days First Northwest is expected to generate 2.41 times less return on investment than Middlefield Banc. But when comparing it to its historical volatility, First Northwest Bancorp is 1.52 times less risky than Middlefield Banc. It trades about 0.02 of its potential returns per unit of risk. Middlefield Banc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,542 in Middlefield Banc on August 28, 2024 and sell it today you would earn a total of 576.00 from holding Middlefield Banc or generate 22.66% 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. Middlefield Banc
Performance |
| Timeline |
| First Northwest Bancorp |
| Middlefield Banc |
First Northwest and Middlefield Banc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Northwest and Middlefield Banc
The main advantage of trading using opposite First Northwest and Middlefield Banc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Northwest position performs unexpectedly, Middlefield Banc 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 Middlefield Banc will offset losses from the drop in Middlefield Banc's long position.| First Northwest vs. Fifth Third Bancorp | First Northwest vs. Huntington Bancshares Incorporated | First Northwest vs. MT Bank |
| Middlefield Banc vs. Home Federal Bancorp | Middlefield Banc vs. First Northwest Bancorp | Middlefield Banc vs. Lake Shore Bancorp | Middlefield Banc 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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