Correlation Between FBR ASSET and Northwest Bancshares

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Can any of the company-specific risk be diversified away by investing in both FBR ASSET and Northwest Bancshares 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 FBR ASSET and Northwest Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FBR ASSET INVESTMENT and Northwest Bancshares, you can compare the effects of market volatilities on FBR ASSET and Northwest Bancshares 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 FBR ASSET with a short position of Northwest Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of FBR ASSET and Northwest Bancshares.

Diversification Opportunities for FBR ASSET and Northwest Bancshares

-0.49
  Correlation Coefficient

Very good diversification

The 3 months correlation between FBR ASSET and Northwest is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding FBR ASSET INVESTMENT and Northwest Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northwest Bancshares and FBR ASSET 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 FBR ASSET INVESTMENT are associated (or correlated) with Northwest Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northwest Bancshares has no effect on the direction of FBR ASSET i.e., FBR ASSET and Northwest Bancshares go up and down completely randomly.

Pair Corralation between FBR ASSET and Northwest Bancshares

Allowing for the 90-day total investment horizon FBR ASSET INVESTMENT is expected to under-perform the Northwest Bancshares. In addition to that, FBR ASSET is 2.94 times more volatile than Northwest Bancshares. It trades about -0.01 of its total potential returns per unit of risk. Northwest Bancshares is currently generating about 0.33 per unit of volatility. If you would invest  1,221  in Northwest Bancshares on May 11, 2022 and sell it today you would earn a total of  222.00  from holding Northwest Bancshares or generate 18.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy80.49%
ValuesDaily Returns

FBR ASSET INVESTMENT  vs.  Northwest Bancshares

 Performance (%) 
       Timeline  
FBR ASSET INVESTMENT 
FBR ASSET Performance
0 of 100
Over the last 90 days FBR ASSET INVESTMENT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, FBR ASSET is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Northwest Bancshares 
Northwest Performance
18 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Northwest Bancshares are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental drivers, Northwest Bancshares reported solid returns over the last few months and may actually be approaching a breakup point.

Northwest Price Channel

FBR ASSET and Northwest Bancshares Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with FBR ASSET and Northwest Bancshares

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

FBR ASSET INVESTMENT

Pair trading matchups for FBR ASSET

The idea behind FBR ASSET INVESTMENT and Northwest Bancshares 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.

Northwest Bancshares

Pair trading matchups for Northwest Bancshares

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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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