Correlation Between Westamerica Bancorporation and Brown Brown
Can any of the company-specific risk be diversified away by investing in both Westamerica Bancorporation and Brown Brown 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 Westamerica Bancorporation and Brown Brown into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westamerica Bancorporation and Brown Brown, you can compare the effects of market volatilities on Westamerica Bancorporation and Brown Brown 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 Westamerica Bancorporation with a short position of Brown Brown. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westamerica Bancorporation and Brown Brown.
Diversification Opportunities for Westamerica Bancorporation and Brown Brown
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Westamerica and Brown is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Westamerica Bancorp. and Brown Brown in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Brown and Westamerica Bancorporation 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 Westamerica Bancorporation are associated (or correlated) with Brown Brown. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brown Brown has no effect on the direction of Westamerica Bancorporation i.e., Westamerica Bancorporation and Brown Brown go up and down completely randomly.
Pair Corralation between Westamerica Bancorporation and Brown Brown
Given the investment horizon of 90 days Westamerica Bancorporation is expected to generate 2.63 times more return on investment than Brown Brown. However, Westamerica Bancorporation is 2.63 times more volatile than Brown Brown. It trades about 0.16 of its potential returns per unit of risk. Brown Brown is currently generating about 0.27 per unit of risk. If you would invest 5,203 in Westamerica Bancorporation on August 31, 2024 and sell it today you would earn a total of 551.00 from holding Westamerica Bancorporation or generate 10.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westamerica Bancorp. vs. Brown Brown
Performance |
| Timeline |
| Westamerica Bancorporation |
| Brown Brown |
Westamerica Bancorporation and Brown Brown Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westamerica Bancorporation and Brown Brown
The main advantage of trading using opposite Westamerica Bancorporation and Brown Brown positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westamerica Bancorporation position performs unexpectedly, Brown Brown 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 Brown Brown will offset losses from the drop in Brown Brown's long position.| Westamerica Bancorporation vs. Heritage Commerce Corp | Westamerica Bancorporation vs. Heritage Financial | Westamerica Bancorporation vs. Penns Woods Bancorp | Westamerica Bancorporation vs. 1st Source |
| Brown Brown vs. Marsh McLennan Companies | Brown Brown vs. Aon PLC | Brown Brown vs. Willis Towers Watson | Brown Brown vs. Erie Indemnity |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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