Correlation Between Westamerica Bancorporation and US Bancorp
Can any of the company-specific risk be diversified away by investing in both Westamerica Bancorporation and US Bancorp 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 US Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westamerica Bancorporation and US Bancorp, you can compare the effects of market volatilities on Westamerica Bancorporation and US Bancorp 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 US Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westamerica Bancorporation and US Bancorp.
Diversification Opportunities for Westamerica Bancorporation and US Bancorp
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Westamerica and USB-PQ is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Westamerica Bancorp. and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp 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 US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of Westamerica Bancorporation i.e., Westamerica Bancorporation and US Bancorp go up and down completely randomly.
Pair Corralation between Westamerica Bancorporation and US Bancorp
Given the investment horizon of 90 days Westamerica Bancorporation is expected to generate 2.39 times more return on investment than US Bancorp. However, Westamerica Bancorporation is 2.39 times more volatile than US Bancorp. It trades about 0.09 of its potential returns per unit of risk. US Bancorp is currently generating about 0.08 per unit of risk. If you would invest 4,741 in Westamerica Bancorporation on August 28, 2024 and sell it today you would earn a total of 1,082 from holding Westamerica Bancorporation or generate 22.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westamerica Bancorp. vs. US Bancorp
Performance |
| Timeline |
| Westamerica Bancorporation |
| US Bancorp |
Westamerica Bancorporation and US Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westamerica Bancorporation and US Bancorp
The main advantage of trading using opposite Westamerica Bancorporation and US Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westamerica Bancorporation position performs unexpectedly, US Bancorp 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 US Bancorp will offset losses from the drop in US Bancorp'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 |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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