Correlation Between First Northwest and Glacier Bancorp

Can any of the company-specific risk be diversified away by investing in both First Northwest and Glacier 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 First Northwest and Glacier Bancorp 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 Glacier Bancorp, you can compare the effects of market volatilities on First Northwest and Glacier 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 First Northwest with a short position of Glacier Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Northwest and Glacier Bancorp.

Diversification Opportunities for First Northwest and Glacier Bancorp

0.38

Correlation Coefficient

First Northwest  Glacier Bancorp

Weak diversification

The 3 months correlation between First and Glacier is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding First Northwest Bancorp and Glacier Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glacier Bancorp 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 Glacier Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glacier Bancorp has no effect on the direction of First Northwest i.e., First Northwest and Glacier Bancorp go up and down completely randomly.

Pair Corralation between First Northwest and Glacier Bancorp

Given the investment horizon of 90 days First Northwest Bancorp is expected to under-perform the Glacier Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, First Northwest Bancorp is 1.3 times less risky than Glacier Bancorp. The stock trades about -0.03 of its potential returns per unit of risk. The Glacier Bancorp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  4,575  in Glacier Bancorp on September 24, 2024 and sell it today you would earn a total of  470.00  from holding Glacier Bancorp or generate 10.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

First Northwest Bancorp  vs.  Glacier Bancorp

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.

Glacier Bancorp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Glacier Bancorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting fundamental indicators, Glacier Bancorp demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Northwest and Glacier Bancorp

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

The idea behind First Northwest Bancorp and Glacier 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.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.