Correlation Between Liberty Northwest and Hilltop Holdings
Can any of the company-specific risk be diversified away by investing in both Liberty Northwest and Hilltop Holdings 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 Liberty Northwest and Hilltop Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Liberty Northwest Bancorp and Hilltop Holdings, you can compare the effects of market volatilities on Liberty Northwest and Hilltop Holdings 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 Liberty Northwest with a short position of Hilltop Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty Northwest and Hilltop Holdings.
Diversification Opportunities for Liberty Northwest and Hilltop Holdings
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Liberty and Hilltop is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Northwest Bancorp and Hilltop Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hilltop Holdings and Liberty 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 Liberty Northwest Bancorp are associated (or correlated) with Hilltop Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hilltop Holdings has no effect on the direction of Liberty Northwest i.e., Liberty Northwest and Hilltop Holdings go up and down completely randomly.
Pair Corralation between Liberty Northwest and Hilltop Holdings
Given the investment horizon of 90 days Liberty Northwest is expected to generate 1.79 times less return on investment than Hilltop Holdings. But when comparing it to its historical volatility, Liberty Northwest Bancorp is 1.37 times less risky than Hilltop Holdings. It trades about 0.14 of its potential returns per unit of risk. Hilltop Holdings is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 2,943 in Hilltop Holdings on November 28, 2024 and sell it today you would earn a total of 196.00 from holding Hilltop Holdings or generate 6.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Liberty Northwest Bancorp vs. Hilltop Holdings
Performance |
| Timeline |
| Liberty Northwest Bancorp |
| Hilltop Holdings |
Liberty Northwest and Hilltop Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Liberty Northwest and Hilltop Holdings
The main advantage of trading using opposite Liberty Northwest and Hilltop Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liberty Northwest position performs unexpectedly, Hilltop Holdings 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 Hilltop Holdings will offset losses from the drop in Hilltop Holdings' long position.| Liberty Northwest vs. Sun Country Airlines | Liberty Northwest vs. Aterian | Liberty Northwest vs. Toro | Liberty Northwest vs. Cedar Realty Trust |
| Hilltop Holdings vs. Home Federal Bancorp | Hilltop Holdings vs. First Financial Northwest | Hilltop Holdings vs. First Northwest Bancorp | Hilltop Holdings vs. First Capital |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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