Correlation Between First Community and Waterstone Financial
Can any of the company-specific risk be diversified away by investing in both First Community and Waterstone Financial 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 First Community and Waterstone Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Community and Waterstone Financial, you can compare the effects of market volatilities on First Community and Waterstone Financial 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 First Community with a short position of Waterstone Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Community and Waterstone Financial.
Diversification Opportunities for First Community and Waterstone Financial
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Waterstone is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding First Community and Waterstone Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waterstone Financial and First Community 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 First Community are associated (or correlated) with Waterstone Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waterstone Financial has no effect on the direction of First Community i.e., First Community and Waterstone Financial go up and down completely randomly.
Pair Corralation between First Community and Waterstone Financial
Given the investment horizon of 90 days First Community is expected to generate 1.05 times more return on investment than Waterstone Financial. However, First Community is 1.05 times more volatile than Waterstone Financial. It trades about 0.05 of its potential returns per unit of risk. Waterstone Financial is currently generating about 0.04 per unit of risk. If you would invest 2,091 in First Community on August 25, 2024 and sell it today you would earn a total of 414.00 from holding First Community or generate 19.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Community vs. Waterstone Financial
Performance |
| Timeline |
| First Community |
| Waterstone Financial |
First Community and Waterstone Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Community and Waterstone Financial
The main advantage of trading using opposite First Community and Waterstone Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Community position performs unexpectedly, Waterstone Financial 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 Waterstone Financial will offset losses from the drop in Waterstone Financial's long position.| First Community vs. Community West Bancshares | First Community vs. First Financial Northwest | First Community vs. First Northwest Bancorp | First Community vs. Home Federal Bancorp |
| Waterstone Financial vs. National Bank Holdings | Waterstone Financial vs. Community West Bancshares | Waterstone Financial vs. Financial Institutions | Waterstone Financial vs. Kearny Financial Corp |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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