Correlation Between First Northwest and Westbury Bancorp
Can any of the company-specific risk be diversified away by investing in both First Northwest and Westbury Bancorp 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 Westbury Bancorp 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 Westbury Bancorp, you can compare the effects of market volatilities on First Northwest and Westbury Bancorp 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 Westbury Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Northwest and Westbury Bancorp.
Diversification Opportunities for First Northwest and Westbury Bancorp
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and Westbury is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding First Northwest Bancorp and Westbury Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westbury 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 Westbury Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westbury Bancorp has no effect on the direction of First Northwest i.e., First Northwest and Westbury Bancorp go up and down completely randomly.
Pair Corralation between First Northwest and Westbury Bancorp
Given the investment horizon of 90 days First Northwest Bancorp is expected to under-perform the Westbury Bancorp. In addition to that, First Northwest is 4.08 times more volatile than Westbury Bancorp. It trades about -0.01 of its total potential returns per unit of risk. Westbury Bancorp is currently generating about 0.12 per unit of volatility. If you would invest 2,769 in Westbury Bancorp on August 25, 2024 and sell it today you would earn a total of 71.00 from holding Westbury Bancorp or generate 2.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 9.05% |
| Values | Daily Returns |
First Northwest Bancorp vs. Westbury Bancorp
Performance |
| Timeline |
| First Northwest Bancorp |
| Westbury Bancorp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
First Northwest and Westbury Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Northwest and Westbury Bancorp
The main advantage of trading using opposite First Northwest and Westbury Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Northwest position performs unexpectedly, Westbury Bancorp 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 Westbury Bancorp will offset losses from the drop in Westbury Bancorp'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 |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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