Correlation Between First Northwest and ChoiceOne Financial

Can any of the company-specific risk be diversified away by investing in both First Northwest and ChoiceOne Financial 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 First Northwest and ChoiceOne Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Northwest Bancorp and ChoiceOne Financial Services, you can compare the effects of market volatilities on First Northwest and ChoiceOne Financial 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 First Northwest with a short position of ChoiceOne Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Northwest and ChoiceOne Financial.

Diversification Opportunities for First Northwest and ChoiceOne Financial

0.17

Correlation Coefficient

First Northwest  ChoiceOne Financial

Average diversification

The 3 months correlation between First and ChoiceOne is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding First Northwest Bancorp and ChoiceOne Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChoiceOne Financial and First Northwest 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 First Northwest Bancorp are associated (or correlated) with ChoiceOne Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ChoiceOne Financial has no effect on the direction of First Northwest i.e., First Northwest and ChoiceOne Financial go up and down completely randomly.

Pair Corralation between First Northwest and ChoiceOne Financial

Given the investment horizon of 90 days First Northwest is expected to generate 2.66 times less return on investment than ChoiceOne Financial. In addition to that, First Northwest is 1.16 times more volatile than ChoiceOne Financial Services. It trades about 0.08 of its total potential returns per unit of risk. ChoiceOne Financial Services is currently generating about 0.26 per unit of volatility. If you would invest  2,944  in ChoiceOne Financial Services on September 4, 2024 and sell it today you would earn a total of  760.00  from holding ChoiceOne Financial Services or generate 25.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

First Northwest Bancorp  vs.  ChoiceOne Financial Services

First Northwest Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Northwest Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, First Northwest is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

ChoiceOne Financial

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ChoiceOne Financial Services are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, ChoiceOne Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Northwest and ChoiceOne Financial

The main advantage of trading using opposite First Northwest and ChoiceOne Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Northwest position performs unexpectedly, ChoiceOne Financial 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 ChoiceOne Financial will offset losses from the drop in ChoiceOne Financial's long position.

The idea behind First Northwest Bancorp and ChoiceOne Financial Services 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.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.