Correlation Between First Northwest and Oak Valley
Can any of the company-specific risk be diversified away by investing in both First Northwest and Oak Valley 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 Oak Valley 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 Oak Valley Bancorp, you can compare the effects of market volatilities on First Northwest and Oak Valley 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 Oak Valley. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Northwest and Oak Valley.
Diversification Opportunities for First Northwest and Oak Valley
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between First and Oak is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding First Northwest Bancorp and Oak Valley Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oak Valley 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 Oak Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oak Valley Bancorp has no effect on the direction of First Northwest i.e., First Northwest and Oak Valley go up and down completely randomly.
Pair Corralation between First Northwest and Oak Valley
Given the investment horizon of 90 days First Northwest Bancorp is expected to under-perform the Oak Valley. But the stock apears to be less risky and, when comparing its historical volatility, First Northwest Bancorp is 1.11 times less risky than Oak Valley. The stock trades about -0.04 of its potential returns per unit of risk. The Oak Valley Bancorp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,493 in Oak Valley Bancorp on August 24, 2024 and sell it today you would earn a total of 524.00 from holding Oak Valley Bancorp or generate 21.02% 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. Oak Valley Bancorp
Performance |
| Timeline |
| First Northwest Bancorp |
| Oak Valley Bancorp |
First Northwest and Oak Valley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Northwest and Oak Valley
The main advantage of trading using opposite First Northwest and Oak Valley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Northwest position performs unexpectedly, Oak Valley 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 Oak Valley will offset losses from the drop in Oak Valley'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 |
| Oak Valley vs. Home Federal Bancorp | Oak Valley vs. Lake Shore Bancorp | Oak Valley vs. Community West Bancshares | Oak Valley vs. Magyar 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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