Correlation Between Westamerica Bancorporation and Waterstone Financial
Can any of the company-specific risk be diversified away by investing in both Westamerica Bancorporation and Waterstone Financial 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 Waterstone Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westamerica Bancorporation and Waterstone Financial, you can compare the effects of market volatilities on Westamerica Bancorporation and Waterstone Financial 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 Waterstone Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westamerica Bancorporation and Waterstone Financial.
Diversification Opportunities for Westamerica Bancorporation and Waterstone Financial
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Westamerica and Waterstone is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Westamerica Bancorp. and Waterstone Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waterstone Financial 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 Waterstone Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waterstone Financial has no effect on the direction of Westamerica Bancorporation i.e., Westamerica Bancorporation and Waterstone Financial go up and down completely randomly.
Pair Corralation between Westamerica Bancorporation and Waterstone Financial
Given the investment horizon of 90 days Westamerica Bancorporation is expected to under-perform the Waterstone Financial. But the stock apears to be less risky and, when comparing its historical volatility, Westamerica Bancorporation is 1.61 times less risky than Waterstone Financial. The stock trades about -0.03 of its potential returns per unit of risk. The Waterstone Financial is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,328 in Waterstone Financial on November 1, 2024 and sell it today you would earn a total of 61.00 from holding Waterstone Financial or generate 4.59% 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. Waterstone Financial
Performance |
| Timeline |
| Westamerica Bancorporation |
| Waterstone Financial |
Westamerica Bancorporation and Waterstone Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westamerica Bancorporation and Waterstone Financial
The main advantage of trading using opposite Westamerica Bancorporation and Waterstone Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westamerica Bancorporation position performs unexpectedly, Waterstone Financial 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 Waterstone Financial will offset losses from the drop in Waterstone Financial'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 |
| Waterstone Financial vs. National Bank Holdings | Waterstone Financial vs. Community West Bancshares | Waterstone Financial vs. Financial Institutions | Waterstone Financial vs. Kearny Financial Corp |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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