Correlation Between FB Financial and Finward Bancorp

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

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

Diversification Opportunities for FB Financial and Finward Bancorp

0.32

Correlation Coefficient

FB Financial  Finward Bancorp

Weak diversification

The 3 months correlation between FBK and Finward is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding FB Financial Corp and Finward Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finward Bancorp and FB Financial 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 FB Financial Corp are associated (or correlated) with Finward Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finward Bancorp has no effect on the direction of FB Financial i.e., FB Financial and Finward Bancorp go up and down completely randomly.

Pair Corralation between FB Financial and Finward Bancorp

Considering the 90-day investment horizon FB Financial Corp is expected to generate 3.58 times more return on investment than Finward Bancorp. However, FB Financial is 3.58 times more volatile than Finward Bancorp. It trades about 0.0 of its potential returns per unit of risk. Finward Bancorp is currently generating about -0.04 per unit of risk. If you would invest  3,685  in FB Financial Corp on February 1, 2024 and sell it today you would lose (20.00) from holding FB Financial Corp or give up 0.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

FB Financial Corp  vs.  Finward Bancorp

FB Financial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FB Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, FB Financial is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Finward Bancorp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Finward Bancorp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Finward Bancorp is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with FB Financial and Finward Bancorp

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

The idea behind FB Financial Corp and Finward 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.