Correlation Between Home Federal and First Northwest
Can any of the company-specific risk be diversified away by investing in both Home Federal 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 Home Federal and First Northwest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Federal Bancorp and First Northwest Bancorp, you can compare the effects of market volatilities on Home Federal 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 Home Federal with a short position of First Northwest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Federal and First Northwest.
Diversification Opportunities for Home Federal and First Northwest
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Home and First is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal 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 Home Federal 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 Home Federal 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 Home Federal i.e., Home Federal and First Northwest go up and down completely randomly.
Pair Corralation between Home Federal and First Northwest
Given the investment horizon of 90 days Home Federal Bancorp is expected to under-perform the First Northwest. In addition to that, Home Federal is 1.3 times more volatile than First Northwest Bancorp. It trades about -0.02 of its total potential returns per unit of risk. First Northwest Bancorp is currently generating about 0.31 per unit of volatility. If you would invest 1,006 in First Northwest Bancorp on August 27, 2024 and sell it today you would earn a total of 134.00 from holding First Northwest Bancorp or generate 13.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 90.48% |
| Values | Daily Returns |
Home Federal Bancorp vs. First Northwest Bancorp
Performance |
| Timeline |
| Home Federal Bancorp |
| First Northwest Bancorp |
Home Federal and First Northwest Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Federal and First Northwest
The main advantage of trading using opposite Home Federal and First Northwest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Federal 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.The idea behind Home Federal Bancorp and First Northwest Bancorp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| First Northwest vs. Fifth Third Bancorp | First Northwest vs. Zions Bancorporation | First Northwest vs. Huntington Bancshares Incorporated | First Northwest vs. PNC Financial Services |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
Other Complementary Tools
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments |