Correlation Between Orange County and Waterstone Financial
Can any of the company-specific risk be diversified away by investing in both Orange County 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 Orange County and Waterstone Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Orange County Bancorp and Waterstone Financial, you can compare the effects of market volatilities on Orange County 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 Orange County with a short position of Waterstone Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orange County and Waterstone Financial.
Diversification Opportunities for Orange County and Waterstone Financial
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Orange and Waterstone is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Orange County Bancorp and Waterstone Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waterstone Financial and Orange County 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 Orange County Bancorp 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 Orange County i.e., Orange County and Waterstone Financial go up and down completely randomly.
Pair Corralation between Orange County and Waterstone Financial
Considering the 90-day investment horizon Orange County Bancorp is expected to generate 0.92 times more return on investment than Waterstone Financial. However, Orange County Bancorp is 1.09 times less risky than Waterstone Financial. It trades about -0.09 of its potential returns per unit of risk. Waterstone Financial is currently generating about -0.11 per unit of risk. If you would invest 2,750 in Orange County Bancorp on October 20, 2024 and sell it today you would lose (95.00) from holding Orange County Bancorp or give up 3.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Orange County Bancorp vs. Waterstone Financial
Performance |
| Timeline |
| Orange County Bancorp |
| Waterstone Financial |
Orange County and Waterstone Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Orange County and Waterstone Financial
The main advantage of trading using opposite Orange County and Waterstone Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orange County 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.| Orange County vs. Southern States Bancshares | Orange County vs. US Century Bank | Orange County vs. Third Coast Bancshares | Orange County vs. Esquire Financial Holdings |
| Waterstone Financial vs. Visa Class A | Waterstone Financial vs. Diamond Hill Investment | Waterstone Financial vs. Distoken Acquisition | Waterstone Financial vs. AllianceBernstein Holding LP |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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