Correlation Between First Republic and Washington Trust
Can any of the company-specific risk be diversified away by investing in both First Republic and Washington Trust 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 Republic and Washington Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Republic Bank and Washington Trust Bancorp, you can compare the effects of market volatilities on First Republic and Washington Trust 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 Republic with a short position of Washington Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Republic and Washington Trust.
Diversification Opportunities for First Republic and Washington Trust
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and Washington is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding First Republic Bank and Washington Trust Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Washington Trust Bancorp and First Republic 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 Republic Bank are associated (or correlated) with Washington Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Washington Trust Bancorp has no effect on the direction of First Republic i.e., First Republic and Washington Trust go up and down completely randomly.
Pair Corralation between First Republic and Washington Trust
Assuming the 90 days horizon First Republic Bank is expected to under-perform the Washington Trust. In addition to that, First Republic is 9.18 times more volatile than Washington Trust Bancorp. It trades about -0.08 of its total potential returns per unit of risk. Washington Trust Bancorp is currently generating about 0.0 per unit of volatility. If you would invest 4,143 in Washington Trust Bancorp on August 30, 2024 and sell it today you would lose (411.00) from holding Washington Trust Bancorp or give up 9.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 30.85% |
| Values | Daily Returns |
First Republic Bank vs. Washington Trust Bancorp
Performance |
| Timeline |
| First Republic Bank |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Washington Trust Bancorp |
First Republic and Washington Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Republic and Washington Trust
The main advantage of trading using opposite First Republic and Washington Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Republic position performs unexpectedly, Washington Trust 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 Washington Trust will offset losses from the drop in Washington Trust's long position.| First Republic vs. Primerica | First Republic vs. Palomar Holdings | First Republic vs. Kinsale Capital Group | First Republic vs. United Fire Group |
| Washington Trust vs. Univest Pennsylvania | Washington Trust vs. Waterstone Financial | Washington Trust vs. Mid Penn Bancorp | Washington Trust vs. ST Bancorp |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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