Correlation Between Northwest Bancshares and First Capital
Can any of the company-specific risk be diversified away by investing in both Northwest Bancshares and First Capital 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 First Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northwest Bancshares and First Capital, you can compare the effects of market volatilities on Northwest Bancshares and First Capital 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 First Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northwest Bancshares and First Capital.
Diversification Opportunities for Northwest Bancshares and First Capital
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Northwest and First is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Northwest Bancshares and First Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Capital 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 First Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Capital has no effect on the direction of Northwest Bancshares i.e., Northwest Bancshares and First Capital go up and down completely randomly.
Pair Corralation between Northwest Bancshares and First Capital
Given the investment horizon of 90 days Northwest Bancshares is expected to generate 0.86 times more return on investment than First Capital. However, Northwest Bancshares is 1.16 times less risky than First Capital. It trades about -0.05 of its potential returns per unit of risk. First Capital is currently generating about -0.08 per unit of risk. If you would invest 1,119 in Northwest Bancshares on January 25, 2024 and sell it today you would lose (25.00) from holding Northwest Bancshares or give up 2.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northwest Bancshares vs. First Capital
Performance |
| Timeline |
| Northwest Bancshares |
| First Capital |
Northwest Bancshares and First Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northwest Bancshares and First Capital
The main advantage of trading using opposite Northwest Bancshares and First Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northwest Bancshares position performs unexpectedly, First Capital 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 Capital will offset losses from the drop in First Capital's long position.| Northwest Bancshares vs. ST Bancorp | Northwest Bancshares vs. CrossFirst Bankshares | Northwest Bancshares vs. Enterprise Financial Services | Northwest Bancshares vs. The First Bancshares |
| First Capital vs. HMN Financial | First Capital vs. Home Federal Bancorp | First Capital vs. First Financial Northwest | First Capital vs. First Northwest 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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