Correlation Between Summit Bancshares and Liberty Northwest
Can any of the company-specific risk be diversified away by investing in both Summit Bancshares 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 Summit Bancshares and Liberty Northwest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Bancshares and Liberty Northwest Bancorp, you can compare the effects of market volatilities on Summit Bancshares 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 Summit Bancshares with a short position of Liberty Northwest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Bancshares and Liberty Northwest.
Diversification Opportunities for Summit Bancshares and Liberty Northwest
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Summit and Liberty is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Summit Bancshares 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 Summit 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 Summit Bancshares 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 Summit Bancshares i.e., Summit Bancshares and Liberty Northwest go up and down completely randomly.
Pair Corralation between Summit Bancshares and Liberty Northwest
Given the investment horizon of 90 days Summit Bancshares is expected to generate 1.09 times less return on investment than Liberty Northwest. In addition to that, Summit Bancshares is 1.27 times more volatile than Liberty Northwest Bancorp. It trades about 0.05 of its total potential returns per unit of risk. Liberty Northwest Bancorp is currently generating about 0.07 per unit of volatility. If you would invest 520.00 in Liberty Northwest Bancorp on September 3, 2024 and sell it today you would earn a total of 20.00 from holding Liberty Northwest Bancorp or generate 3.85% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 96.92% |
Values | Daily Returns |
Summit Bancshares vs. Liberty Northwest Bancorp
Performance |
Timeline |
Summit Bancshares |
Liberty Northwest Bancorp |
Summit Bancshares and Liberty Northwest Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Summit Bancshares and Liberty Northwest
The main advantage of trading using opposite Summit Bancshares and Liberty Northwest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Bancshares 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.Summit Bancshares vs. First Hawaiian | Summit Bancshares vs. Central Pacific Financial | Summit Bancshares vs. Territorial Bancorp | Summit Bancshares vs. Comerica |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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