Correlation Between TrustCo Bank and Waterstone Financial
Can any of the company-specific risk be diversified away by investing in both TrustCo Bank 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 TrustCo Bank and Waterstone Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TrustCo Bank Corp and Waterstone Financial, you can compare the effects of market volatilities on TrustCo Bank 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 TrustCo Bank with a short position of Waterstone Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of TrustCo Bank and Waterstone Financial.
Diversification Opportunities for TrustCo Bank and Waterstone Financial
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between TrustCo and Waterstone is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding TrustCo Bank Corp and Waterstone Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waterstone Financial and TrustCo Bank 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 TrustCo Bank Corp 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 TrustCo Bank i.e., TrustCo Bank and Waterstone Financial go up and down completely randomly.
Pair Corralation between TrustCo Bank and Waterstone Financial
Given the investment horizon of 90 days TrustCo Bank Corp is expected to generate 1.13 times more return on investment than Waterstone Financial. However, TrustCo Bank is 1.13 times more volatile than Waterstone Financial. It trades about 0.22 of its potential returns per unit of risk. Waterstone Financial is currently generating about 0.05 per unit of risk. If you would invest 3,262 in TrustCo Bank Corp on September 3, 2024 and sell it today you would earn a total of 462.00 from holding TrustCo Bank Corp or generate 14.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
TrustCo Bank Corp vs. Waterstone Financial
Performance |
| Timeline |
| TrustCo Bank Corp |
| Waterstone Financial |
TrustCo Bank and Waterstone Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TrustCo Bank and Waterstone Financial
The main advantage of trading using opposite TrustCo Bank and Waterstone Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TrustCo Bank 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.| TrustCo Bank vs. Southern Missouri Bancorp | TrustCo Bank vs. IF Bancorp | TrustCo Bank vs. Colony Bankcorp | TrustCo Bank vs. Old Point Financial |
| Waterstone Financial vs. JPMorgan Chase Co | Waterstone Financial vs. Citigroup | Waterstone Financial vs. Wells Fargo | Waterstone Financial vs. Toronto Dominion Bank |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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