Correlation Between Finward Bancorp and Business First
Can any of the company-specific risk be diversified away by investing in both Finward Bancorp and Business First 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 Finward Bancorp and Business First into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Finward Bancorp and Business First Bancshares, you can compare the effects of market volatilities on Finward Bancorp and Business First 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 Finward Bancorp with a short position of Business First. Check out your portfolio center. Please also check ongoing floating volatility patterns of Finward Bancorp and Business First.
Diversification Opportunities for Finward Bancorp and Business First
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Finward and Business is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Finward Bancorp and Business First Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Business First Bancshares and Finward Bancorp 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 Finward Bancorp are associated (or correlated) with Business First. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Business First Bancshares has no effect on the direction of Finward Bancorp i.e., Finward Bancorp and Business First go up and down completely randomly.
Pair Corralation between Finward Bancorp and Business First
Given the investment horizon of 90 days Finward Bancorp is expected to under-perform the Business First. But the stock apears to be less risky and, when comparing its historical volatility, Finward Bancorp is 1.1 times less risky than Business First. The stock trades about -0.29 of its potential returns per unit of risk. The Business First Bancshares is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 2,582 in Business First Bancshares on October 20, 2024 and sell it today you would lose (24.00) from holding Business First Bancshares or give up 0.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Finward Bancorp vs. Business First Bancshares
Performance |
| Timeline |
| Finward Bancorp |
| Business First Bancshares |
Finward Bancorp and Business First Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Finward Bancorp and Business First
The main advantage of trading using opposite Finward Bancorp and Business First positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Finward Bancorp position performs unexpectedly, Business First 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 Business First will offset losses from the drop in Business First's long position.| Finward Bancorp vs. Community West Bancshares | Finward Bancorp vs. First Financial Northwest | Finward Bancorp vs. Oak Valley Bancorp | Finward Bancorp vs. Home Federal Bancorp |
| Business First vs. First Community | Business First vs. Community West Bancshares | Business First vs. First Financial Northwest | Business First vs. First Northwest 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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