Correlation Between National Bank and Finward Bancorp
Can any of the company-specific risk be diversified away by investing in both National Bank and Finward Bancorp 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 National Bank and Finward Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Bank Holdings and Finward Bancorp, you can compare the effects of market volatilities on National Bank and Finward Bancorp 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 National Bank with a short position of Finward Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bank and Finward Bancorp.
Diversification Opportunities for National Bank and Finward Bancorp
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between National and Finward is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding National Bank Holdings and Finward Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finward Bancorp and National Bank 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 National Bank Holdings are associated (or correlated) with Finward Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finward Bancorp has no effect on the direction of National Bank i.e., National Bank and Finward Bancorp go up and down completely randomly.
Pair Corralation between National Bank and Finward Bancorp
Given the investment horizon of 90 days National Bank Holdings is expected to generate 3.23 times more return on investment than Finward Bancorp. However, National Bank is 3.23 times more volatile than Finward Bancorp. It trades about 0.13 of its potential returns per unit of risk. Finward Bancorp is currently generating about -0.07 per unit of risk. If you would invest 4,550 in National Bank Holdings on August 28, 2024 and sell it today you would earn a total of 389.00 from holding National Bank Holdings or generate 8.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Bank Holdings vs. Finward Bancorp
Performance |
| Timeline |
| National Bank Holdings |
| Finward Bancorp |
National Bank and Finward Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Bank and Finward Bancorp
The main advantage of trading using opposite National Bank and Finward Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank position performs unexpectedly, Finward Bancorp 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 Finward Bancorp will offset losses from the drop in Finward Bancorp's long position.| National Bank vs. Fifth Third Bancorp | National Bank vs. Zions Bancorporation | National Bank vs. Huntington Bancshares Incorporated | National Bank vs. Comerica |
| Finward Bancorp vs. Community West Bancshares | Finward Bancorp vs. First Financial Northwest | Finward Bancorp vs. Oak Valley Bancorp | Finward Bancorp vs. Home Federal 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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