Correlation Between Five Star and First Northwest
Can any of the company-specific risk be diversified away by investing in both Five Star and First Northwest 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 Five Star and First Northwest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Five Star Bancorp and First Northwest Bancorp, you can compare the effects of market volatilities on Five Star and First Northwest 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 Five Star with a short position of First Northwest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Five Star and First Northwest.
Diversification Opportunities for Five Star and First Northwest
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Five and First is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Five Star Bancorp and First Northwest Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Northwest Bancorp and Five Star 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 Five Star Bancorp are associated (or correlated) with First Northwest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Northwest Bancorp has no effect on the direction of Five Star i.e., Five Star and First Northwest go up and down completely randomly.
Pair Corralation between Five Star and First Northwest
Given the investment horizon of 90 days Five Star is expected to generate 1.39 times less return on investment than First Northwest. In addition to that, Five Star is 1.43 times more volatile than First Northwest Bancorp. It trades about 0.17 of its total potential returns per unit of risk. First Northwest Bancorp is currently generating about 0.33 per unit of volatility. If you would invest 1,006 in First Northwest Bancorp on August 29, 2024 and sell it today you would earn a total of 151.00 from holding First Northwest Bancorp or generate 15.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Five Star Bancorp vs. First Northwest Bancorp
Performance |
| Timeline |
| Five Star Bancorp |
| First Northwest Bancorp |
Five Star and First Northwest Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Five Star and First Northwest
The main advantage of trading using opposite Five Star and First Northwest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Five Star position performs unexpectedly, First Northwest 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 First Northwest will offset losses from the drop in First Northwest's long position.| Five Star vs. Fifth Third Bancorp | Five Star vs. Huntington Bancshares Incorporated | Five Star vs. MT Bank |
| First Northwest vs. Fifth Third Bancorp | First Northwest vs. Huntington Bancshares Incorporated | First Northwest vs. MT Bank |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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