Correlation Between Finward Bancorp and First Business
Can any of the company-specific risk be diversified away by investing in both Finward Bancorp and First Business 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 Finward Bancorp and First Business into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Finward Bancorp and First Business Financial, you can compare the effects of market volatilities on Finward Bancorp and First Business 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 Finward Bancorp with a short position of First Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Finward Bancorp and First Business.
Diversification Opportunities for Finward Bancorp and First Business
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Finward and First is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Finward Bancorp and First Business Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Business Financial and Finward Bancorp 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 Finward Bancorp are associated (or correlated) with First Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Business Financial has no effect on the direction of Finward Bancorp i.e., Finward Bancorp and First Business go up and down completely randomly.
Pair Corralation between Finward Bancorp and First Business
Given the investment horizon of 90 days Finward Bancorp is expected to generate 1.06 times less return on investment than First Business. But when comparing it to its historical volatility, Finward Bancorp is 1.38 times less risky than First Business. It trades about 0.13 of its potential returns per unit of risk. First Business Financial is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 4,289 in First Business Financial on September 8, 2024 and sell it today you would earn a total of 675.00 from holding First Business Financial or generate 15.74% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Finward Bancorp vs. First Business Financial
Performance |
Timeline |
Finward Bancorp |
First Business Financial |
Finward Bancorp and First Business Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Finward Bancorp and First Business
The main advantage of trading using opposite Finward Bancorp and First Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Finward Bancorp position performs unexpectedly, First Business 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 Business will offset losses from the drop in First Business' long position.Finward Bancorp vs. Great Southern Bancorp | Finward Bancorp vs. First Mid Illinois | Finward Bancorp vs. Community West Bancshares | Finward Bancorp vs. Waterstone Financial |
First Business vs. Great Southern Bancorp | First Business vs. First Mid Illinois | First Business vs. Community West Bancshares | First Business vs. Waterstone Financial |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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