Correlation Between Mifflinburg Bancorp and Liberty Northwest

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

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

Diversification Opportunities for Mifflinburg Bancorp and Liberty Northwest

0.35

Correlation Coefficient

Mifflinburg Bancorp  Liberty Northwest

Weak diversification

The 3 months correlation between Mifflinburg and Liberty is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Mifflinburg Bancorp and Liberty Northwest Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Northwest Bancorp and Mifflinburg 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 Mifflinburg Bancorp are associated (or correlated) with Liberty Northwest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Northwest Bancorp has no effect on the direction of Mifflinburg Bancorp i.e., Mifflinburg Bancorp and Liberty Northwest go up and down completely randomly.

Pair Corralation between Mifflinburg Bancorp and Liberty Northwest

Given the investment horizon of 90 days Mifflinburg Bancorp is expected to generate 2.33 times more return on investment than Liberty Northwest. However, Mifflinburg Bancorp is 2.33 times more volatile than Liberty Northwest Bancorp. It trades about 0.08 of its potential returns per unit of risk. Liberty Northwest Bancorp is currently generating about 0.06 per unit of risk. If you would invest  2,045  in Mifflinburg Bancorp on September 4, 2024 and sell it today you would earn a total of  225.00  from holding Mifflinburg Bancorp or generate 11.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Mifflinburg Bancorp  vs.  Liberty Northwest Bancorp

Mifflinburg Bancorp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mifflinburg Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Mifflinburg Bancorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Liberty Northwest Bancorp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Northwest Bancorp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Liberty Northwest is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Mifflinburg Bancorp and Liberty Northwest

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

The idea behind Mifflinburg Bancorp and Liberty Northwest 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.