Correlation Between Northwest Bancshares and Territorial Bancorp

Specify exactly 2 symbols:
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

0.69
  Correlation Coefficient

Poor diversification

The 3 months correlation between Northwest and Territorial is 0.69. 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 1.22 times more return on investment than Territorial Bancorp. However, Northwest Bancshares is 1.22 times more volatile than Territorial Bancorp. It trades about 0.16 of its potential returns per unit of risk. Territorial Bancorp is currently generating about 0.1 per unit of risk. If you would invest  1,193  in Northwest Bancshares on September 5, 2024 and sell it today you would earn a total of  157.00  from holding Northwest Bancshares or generate 13.16% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Northwest Bancshares  vs.  Territorial Bancorp

 Performance 
       Timeline  
Northwest Bancshares 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Northwest Bancshares are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Northwest Bancshares reported solid returns over the last few months and may actually be approaching a breakup point.
Territorial Bancorp 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Territorial Bancorp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Territorial Bancorp reported solid returns over the last few months and may actually be approaching a breakup point.

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.
The idea behind Northwest Bancshares and Territorial 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.
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.

Other Complementary Tools

Volatility Analysis
Get historical volatility and risk analysis based on latest market data
Crypto Correlations
Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins
Companies Directory
Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals
Positions Ratings
Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance
Transaction History
View history of all your transactions and understand their impact on performance