Correlation Between Westamerica Bancorporation and Independent Bank
Can any of the company-specific risk be diversified away by investing in both Westamerica Bancorporation and Independent Bank 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 Independent Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westamerica Bancorporation and Independent Bank, you can compare the effects of market volatilities on Westamerica Bancorporation and Independent Bank 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 Independent Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westamerica Bancorporation and Independent Bank.
Diversification Opportunities for Westamerica Bancorporation and Independent Bank
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Westamerica and Independent is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Westamerica Bancorp. and Independent Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Independent Bank 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 Independent Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Independent Bank has no effect on the direction of Westamerica Bancorporation i.e., Westamerica Bancorporation and Independent Bank go up and down completely randomly.
Pair Corralation between Westamerica Bancorporation and Independent Bank
Given the investment horizon of 90 days Westamerica Bancorporation is expected to generate 1.47 times less return on investment than Independent Bank. But when comparing it to its historical volatility, Westamerica Bancorporation is 1.21 times less risky than Independent Bank. It trades about 0.04 of its potential returns per unit of risk. Independent Bank is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 5,886 in Independent Bank on December 5, 2024 and sell it today you would earn a total of 620.00 from holding Independent Bank or generate 10.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westamerica Bancorp. vs. Independent Bank
Performance |
| Timeline |
| Westamerica Bancorporation |
| Independent Bank |
Westamerica Bancorporation and Independent Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westamerica Bancorporation and Independent Bank
The main advantage of trading using opposite Westamerica Bancorporation and Independent Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westamerica Bancorporation position performs unexpectedly, Independent Bank 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 Independent Bank will offset losses from the drop in Independent Bank's long position.| Westamerica Bancorporation vs. Heritage Commerce Corp | ||
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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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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