Correlation Between Heritage Financial and Westamerica Bancorporation
Can any of the company-specific risk be diversified away by investing in both Heritage Financial and Westamerica Bancorporation 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 Heritage Financial and Westamerica Bancorporation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Heritage Financial and Westamerica Bancorporation, you can compare the effects of market volatilities on Heritage Financial and Westamerica Bancorporation 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 Heritage Financial with a short position of Westamerica Bancorporation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heritage Financial and Westamerica Bancorporation.
Diversification Opportunities for Heritage Financial and Westamerica Bancorporation
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Heritage and Westamerica is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Heritage Financial and Westamerica Bancorp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westamerica Bancorporation and Heritage 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 Heritage Financial are associated (or correlated) with Westamerica Bancorporation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westamerica Bancorporation has no effect on the direction of Heritage Financial i.e., Heritage Financial and Westamerica Bancorporation go up and down completely randomly.
Pair Corralation between Heritage Financial and Westamerica Bancorporation
Given the investment horizon of 90 days Heritage Financial is expected to generate 1.1 times more return on investment than Westamerica Bancorporation. However, Heritage Financial is 1.1 times more volatile than Westamerica Bancorporation. It trades about 0.12 of its potential returns per unit of risk. Westamerica Bancorporation is currently generating about 0.07 per unit of risk. If you would invest 2,372 in Heritage Financial on October 20, 2024 and sell it today you would earn a total of 83.00 from holding Heritage Financial or generate 3.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.0% |
| Values | Daily Returns |
Heritage Financial vs. Westamerica Bancorp.
Performance |
| Timeline |
| Heritage Financial |
| Westamerica Bancorporation |
Heritage Financial and Westamerica Bancorporation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Heritage Financial and Westamerica Bancorporation
The main advantage of trading using opposite Heritage Financial and Westamerica Bancorporation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heritage Financial position performs unexpectedly, Westamerica Bancorporation 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 Westamerica Bancorporation will offset losses from the drop in Westamerica Bancorporation's long position.| Heritage Financial vs. Heritage Commerce Corp | Heritage Financial vs. Horizon Bancorp | Heritage Financial vs. Heartland Financial USA | Heritage Financial vs. Independent Bank |
| Westamerica Bancorporation vs. Heritage Commerce Corp | Westamerica Bancorporation vs. Heritage Financial | Westamerica Bancorporation vs. Penns Woods Bancorp | Westamerica Bancorporation vs. 1st Source |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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