Correlation Between Northwest Bancshares and Territorial Bancorp
Can any of the company-specific risk be diversified away by investing in both Northwest Bancshares and Territorial 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 Northwest Bancshares and Territorial Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northwest Bancshares and Territorial Bancorp, you can compare the effects of market volatilities on Northwest Bancshares and Territorial 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 Northwest Bancshares with a short position of Territorial Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northwest Bancshares and Territorial Bancorp.
Diversification Opportunities for Northwest Bancshares and Territorial Bancorp
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Northwest and Territorial is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Northwest Bancshares and Territorial Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Territorial Bancorp and Northwest Bancshares 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 Northwest Bancshares are associated (or correlated) with Territorial Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Territorial Bancorp has no effect on the direction of Northwest Bancshares i.e., Northwest Bancshares and Territorial Bancorp go up and down completely randomly.
Pair Corralation between Northwest Bancshares and Territorial Bancorp
Assuming the 90 days horizon Northwest Bancshares is expected to generate 1.31 times more return on investment than Territorial Bancorp. However, Northwest Bancshares is 1.31 times more volatile than Territorial Bancorp. It trades about 0.14 of its potential returns per unit of risk. Territorial Bancorp is currently generating about 0.05 per unit of risk. If you would invest 1,203 in Northwest Bancshares on September 7, 2024 and sell it today you would earn a total of 137.00 from holding Northwest Bancshares or generate 11.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northwest Bancshares vs. Territorial Bancorp
Performance |
| Timeline |
| Northwest Bancshares |
| Territorial Bancorp |
Northwest Bancshares and Territorial Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northwest Bancshares and Territorial Bancorp
The main advantage of trading using opposite Northwest Bancshares and Territorial Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northwest Bancshares position performs unexpectedly, Territorial 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 Territorial Bancorp will offset losses from the drop in Territorial Bancorp's long position.| Northwest Bancshares vs. Provident Financial Services | Northwest Bancshares vs. Capitol Federal Financial | Northwest Bancshares vs. Territorial Bancorp | Northwest Bancshares vs. Superior Plus Corp |
| Territorial Bancorp vs. SCOTT TECHNOLOGY | Territorial Bancorp vs. Eagle Materials | Territorial Bancorp vs. Vulcan Materials | Territorial Bancorp vs. Plastic Omnium |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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