Correlation Between Finward Bancorp and Mainstreet Bank
Can any of the company-specific risk be diversified away by investing in both Finward Bancorp and Mainstreet Bank 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 Mainstreet Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Finward Bancorp and Mainstreet Bank, you can compare the effects of market volatilities on Finward Bancorp and Mainstreet Bank 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 Mainstreet Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Finward Bancorp and Mainstreet Bank.
Diversification Opportunities for Finward Bancorp and Mainstreet Bank
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Finward and Mainstreet is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Finward Bancorp and Mainstreet Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mainstreet Bank 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 Mainstreet Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mainstreet Bank has no effect on the direction of Finward Bancorp i.e., Finward Bancorp and Mainstreet Bank go up and down completely randomly.
Pair Corralation between Finward Bancorp and Mainstreet Bank
Given the investment horizon of 90 days Finward Bancorp is expected to under-perform the Mainstreet Bank. But the stock apears to be less risky and, when comparing its historical volatility, Finward Bancorp is 1.04 times less risky than Mainstreet Bank. The stock trades about -0.2 of its potential returns per unit of risk. The Mainstreet Bank is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest 1,766 in Mainstreet Bank on November 3, 2024 and sell it today you would lose (105.00) from holding Mainstreet Bank or give up 5.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Finward Bancorp vs. Mainstreet Bank
Performance |
| Timeline |
| Finward Bancorp |
| Mainstreet Bank |
Finward Bancorp and Mainstreet Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Finward Bancorp and Mainstreet Bank
The main advantage of trading using opposite Finward Bancorp and Mainstreet Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Finward Bancorp position performs unexpectedly, Mainstreet Bank 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 Mainstreet Bank will offset losses from the drop in Mainstreet Bank's long position.| Finward Bancorp vs. US Bancorp | Finward Bancorp vs. Truist Financial Corp | Finward Bancorp vs. Fifth Third Bancorp | Finward Bancorp vs. KeyCorp |
| Mainstreet Bank vs. Oak Valley Bancorp | Mainstreet Bank vs. Home Federal Bancorp | Mainstreet Bank vs. LINKBANCORP | Mainstreet Bank 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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