Correlation Between Westamerica Bancorporation and Washington Federal
Can any of the company-specific risk be diversified away by investing in both Westamerica Bancorporation and Washington Federal 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 Washington Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westamerica Bancorporation and Washington Federal, you can compare the effects of market volatilities on Westamerica Bancorporation and Washington Federal 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 Washington Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westamerica Bancorporation and Washington Federal.
Diversification Opportunities for Westamerica Bancorporation and Washington Federal
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Westamerica and Washington is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Westamerica Bancorp. and Washington Federal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Washington Federal 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 Washington Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Washington Federal has no effect on the direction of Westamerica Bancorporation i.e., Westamerica Bancorporation and Washington Federal go up and down completely randomly.
Pair Corralation between Westamerica Bancorporation and Washington Federal
Given the investment horizon of 90 days Westamerica Bancorporation is expected to generate 1.76 times less return on investment than Washington Federal. But when comparing it to its historical volatility, Westamerica Bancorporation is 1.12 times less risky than Washington Federal. It trades about 0.01 of its potential returns per unit of risk. Washington Federal is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 2,927 in Washington Federal on November 9, 2024 and sell it today you would earn a total of 140.00 from holding Washington Federal or generate 4.78% 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. Washington Federal
Performance |
| Timeline |
| Westamerica Bancorporation |
| Washington Federal |
Westamerica Bancorporation and Washington Federal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westamerica Bancorporation and Washington Federal
The main advantage of trading using opposite Westamerica Bancorporation and Washington Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westamerica Bancorporation position performs unexpectedly, Washington Federal 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 Washington Federal will offset losses from the drop in Washington Federal'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 |
| Washington Federal vs. Finward Bancorp | Washington Federal vs. Great Southern Bancorp | Washington Federal vs. First Mid Illinois | Washington Federal vs. Franklin Financial Services |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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