Correlation Between Potomac Bancshares and WVS Financial
Can any of the company-specific risk be diversified away by investing in both Potomac Bancshares and WVS 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 Potomac Bancshares and WVS Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Potomac Bancshares and WVS Financial Corp, you can compare the effects of market volatilities on Potomac Bancshares and WVS 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 Potomac Bancshares with a short position of WVS Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Potomac Bancshares and WVS Financial.
Diversification Opportunities for Potomac Bancshares and WVS Financial
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Potomac and WVS is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Potomac Bancshares and WVS Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WVS Financial Corp and Potomac Bancshares 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 Potomac Bancshares are associated (or correlated) with WVS Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WVS Financial Corp has no effect on the direction of Potomac Bancshares i.e., Potomac Bancshares and WVS Financial go up and down completely randomly.
Pair Corralation between Potomac Bancshares and WVS Financial
Given the investment horizon of 90 days Potomac Bancshares is expected to generate 4.79 times more return on investment than WVS Financial. However, Potomac Bancshares is 4.79 times more volatile than WVS Financial Corp. It trades about 0.0 of its potential returns per unit of risk. WVS Financial Corp is currently generating about -0.11 per unit of risk. If you would invest 1,700 in Potomac Bancshares on August 26, 2024 and sell it today you would lose (180.00) from holding Potomac Bancshares or give up 10.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 10.48% |
| Values | Daily Returns |
Potomac Bancshares vs. WVS Financial Corp
Performance |
| Timeline |
| Potomac Bancshares |
| WVS Financial Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Potomac Bancshares and WVS Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Potomac Bancshares and WVS Financial
The main advantage of trading using opposite Potomac Bancshares and WVS Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Potomac Bancshares position performs unexpectedly, WVS 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 WVS Financial will offset losses from the drop in WVS Financial's long position.| Potomac Bancshares vs. Invesco High Income | Potomac Bancshares vs. Blackrock Muniholdings Ny | Potomac Bancshares vs. MFS Investment Grade | Potomac Bancshares vs. Federated Premier Municipal |
| WVS Financial vs. Pioneer Bankcorp | WVS Financial vs. Liberty Northwest Bancorp | WVS Financial vs. First Community | WVS Financial vs. Coeur dAlene 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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