Correlation Between First Northwest and Southern Missouri
Can any of the company-specific risk be diversified away by investing in both First Northwest and Southern Missouri 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 Southern Missouri 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 Southern Missouri Bancorp, you can compare the effects of market volatilities on First Northwest and Southern Missouri 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 Southern Missouri. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Northwest and Southern Missouri.
Diversification Opportunities for First Northwest and Southern Missouri
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and Southern is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding First Northwest Bancorp and Southern Missouri Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Missouri 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 Southern Missouri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Missouri Bancorp has no effect on the direction of First Northwest i.e., First Northwest and Southern Missouri go up and down completely randomly.
Pair Corralation between First Northwest and Southern Missouri
Given the investment horizon of 90 days First Northwest Bancorp is expected to under-perform the Southern Missouri. But the stock apears to be less risky and, when comparing its historical volatility, First Northwest Bancorp is 1.17 times less risky than Southern Missouri. The stock trades about -0.01 of its potential returns per unit of risk. The Southern Missouri Bancorp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 4,360 in Southern Missouri Bancorp on September 12, 2024 and sell it today you would earn a total of 2,232 from holding Southern Missouri Bancorp or generate 51.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Northwest Bancorp vs. Southern Missouri Bancorp
Performance |
| Timeline |
| First Northwest Bancorp |
| Southern Missouri Bancorp |
First Northwest and Southern Missouri Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Northwest and Southern Missouri
The main advantage of trading using opposite First Northwest and Southern Missouri positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Northwest position performs unexpectedly, Southern Missouri 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 Southern Missouri will offset losses from the drop in Southern Missouri'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 |
| Southern Missouri vs. Commerzbank AG | Southern Missouri vs. Investar Holding Corp | Southern Missouri vs. Colony Bankcorp | Southern Missouri vs. Western New England |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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