Correlation Between MidWestOne Financial and Washington Trust
Can any of the company-specific risk be diversified away by investing in both MidWestOne Financial 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 MidWestOne Financial and Washington Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MidWestOne Financial Group and Washington Trust Bancorp, you can compare the effects of market volatilities on MidWestOne Financial 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 MidWestOne Financial with a short position of Washington Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of MidWestOne Financial and Washington Trust.
Diversification Opportunities for MidWestOne Financial and Washington Trust
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between MidWestOne and Washington is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding MidWestOne Financial Group 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 MidWestOne 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 MidWestOne Financial Group 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 MidWestOne Financial i.e., MidWestOne Financial and Washington Trust go up and down completely randomly.
Pair Corralation between MidWestOne Financial and Washington Trust
Given the investment horizon of 90 days MidWestOne Financial Group is expected to generate 0.91 times more return on investment than Washington Trust. However, MidWestOne Financial Group is 1.1 times less risky than Washington Trust. It trades about 0.16 of its potential returns per unit of risk. Washington Trust Bancorp is currently generating about 0.13 per unit of risk. If you would invest 2,100 in MidWestOne Financial Group on September 1, 2024 and sell it today you would earn a total of 1,195 from holding MidWestOne Financial Group or generate 56.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
MidWestOne Financial Group vs. Washington Trust Bancorp
Performance |
| Timeline |
| MidWestOne Financial |
| Washington Trust Bancorp |
MidWestOne Financial and Washington Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MidWestOne Financial and Washington Trust
The main advantage of trading using opposite MidWestOne Financial and Washington Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MidWestOne Financial 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.| MidWestOne Financial vs. Home Federal Bancorp | MidWestOne Financial vs. Lake Shore Bancorp | MidWestOne Financial vs. Community West Bancshares | MidWestOne Financial vs. First Northwest Bancorp |
| 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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