Correlation Between Heritage Financial and Waterstone Financial
Can any of the company-specific risk be diversified away by investing in both Heritage Financial 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 Heritage Financial and Waterstone Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Heritage Financial and Waterstone Financial, you can compare the effects of market volatilities on Heritage Financial 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 Heritage Financial with a short position of Waterstone Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heritage Financial and Waterstone Financial.
Diversification Opportunities for Heritage Financial and Waterstone Financial
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Heritage and Waterstone is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Heritage Financial and Waterstone Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waterstone Financial 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 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 Heritage Financial i.e., Heritage Financial and Waterstone Financial go up and down completely randomly.
Pair Corralation between Heritage Financial and Waterstone Financial
Given the investment horizon of 90 days Heritage Financial is expected to under-perform the Waterstone Financial. But the stock apears to be less risky and, when comparing its historical volatility, Heritage Financial is 1.39 times less risky than Waterstone Financial. The stock trades about 0.0 of its potential returns per unit of risk. The Waterstone Financial is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 1,320 in Waterstone Financial on November 18, 2024 and sell it today you would earn a total of 150.00 from holding Waterstone Financial or generate 11.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Heritage Financial vs. Waterstone Financial
Performance |
| Timeline |
| Heritage Financial |
| Waterstone Financial |
Heritage Financial and Waterstone Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Heritage Financial and Waterstone Financial
The main advantage of trading using opposite Heritage Financial and Waterstone Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heritage Financial 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.| Heritage Financial vs. Heritage Commerce Corp | Heritage Financial vs. Horizon Bancorp | Heritage Financial vs. Independent Bank | Heritage Financial vs. Great Southern 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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