Correlation Between Westamerica Bancorporation and Northwest Bancshares
Can any of the company-specific risk be diversified away by investing in both Westamerica Bancorporation and Northwest Bancshares 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 Northwest Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westamerica Bancorporation and Northwest Bancshares, you can compare the effects of market volatilities on Westamerica Bancorporation and Northwest Bancshares 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 Northwest Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westamerica Bancorporation and Northwest Bancshares.
Diversification Opportunities for Westamerica Bancorporation and Northwest Bancshares
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Westamerica and Northwest is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Westamerica Bancorp. and Northwest Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northwest Bancshares 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 Northwest Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northwest Bancshares has no effect on the direction of Westamerica Bancorporation i.e., Westamerica Bancorporation and Northwest Bancshares go up and down completely randomly.
Pair Corralation between Westamerica Bancorporation and Northwest Bancshares
Given the investment horizon of 90 days Westamerica Bancorporation is expected to generate 1.01 times less return on investment than Northwest Bancshares. But when comparing it to its historical volatility, Westamerica Bancorporation is 1.09 times less risky than Northwest Bancshares. It trades about 0.19 of its potential returns per unit of risk. Northwest Bancshares is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 1,311 in Northwest Bancshares on September 1, 2024 and sell it today you would earn a total of 157.00 from holding Northwest Bancshares or generate 11.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westamerica Bancorp. vs. Northwest Bancshares
Performance |
| Timeline |
| Westamerica Bancorporation |
| Northwest Bancshares |
Westamerica Bancorporation and Northwest Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westamerica Bancorporation and Northwest Bancshares
The main advantage of trading using opposite Westamerica Bancorporation and Northwest Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westamerica Bancorporation position performs unexpectedly, Northwest Bancshares 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 Northwest Bancshares will offset losses from the drop in Northwest Bancshares' long position.| Westamerica Bancorporation vs. Heritage Commerce Corp | Westamerica Bancorporation vs. Heritage Financial | Westamerica Bancorporation vs. Penns Woods Bancorp | Westamerica Bancorporation vs. 1st Source |
| Northwest Bancshares vs. ST Bancorp | Northwest Bancshares vs. CrossFirst Bankshares | Northwest Bancshares vs. Enterprise Financial Services | Northwest Bancshares vs. The First Bancshares, |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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