Correlation Between Orange County and First Northwest
Can any of the company-specific risk be diversified away by investing in both Orange County 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 Orange County and First Northwest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Orange County Bancorp and First Northwest Bancorp, you can compare the effects of market volatilities on Orange County 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 Orange County with a short position of First Northwest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orange County and First Northwest.
Diversification Opportunities for Orange County and First Northwest
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Orange and First is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Orange County 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 Orange County 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 Orange County 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 Orange County i.e., Orange County and First Northwest go up and down completely randomly.
Pair Corralation between Orange County and First Northwest
Considering the 90-day investment horizon Orange County Bancorp is expected to under-perform the First Northwest. But the stock apears to be less risky and, when comparing its historical volatility, Orange County Bancorp is 1.04 times less risky than First Northwest. The stock trades about -0.23 of its potential returns per unit of risk. The First Northwest Bancorp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,020 in First Northwest Bancorp on November 1, 2024 and sell it today you would earn a total of 44.00 from holding First Northwest Bancorp or generate 4.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Orange County Bancorp vs. First Northwest Bancorp
Performance |
| Timeline |
| Orange County Bancorp |
| First Northwest Bancorp |
Orange County and First Northwest Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Orange County and First Northwest
The main advantage of trading using opposite Orange County and First Northwest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orange County 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.| Orange County vs. Southern States Bancshares | Orange County vs. US Century Bank | Orange County vs. Third Coast Bancshares | Orange County vs. Esquire Financial Holdings |
| First Northwest vs. Home Federal Bancorp | First Northwest vs. First Financial Northwest | First Northwest vs. First Capital | First Northwest vs. Community West Bancshares |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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