Correlation Between Washington Trust and Arrow Financial
Can any of the company-specific risk be diversified away by investing in both Washington Trust and Arrow 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 Washington Trust and Arrow Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Washington Trust Bancorp and Arrow Financial, you can compare the effects of market volatilities on Washington Trust and Arrow 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 Washington Trust with a short position of Arrow Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Washington Trust and Arrow Financial.
Diversification Opportunities for Washington Trust and Arrow Financial
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Washington and Arrow is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Washington Trust Bancorp and Arrow Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Financial and Washington Trust 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 Washington Trust Bancorp are associated (or correlated) with Arrow Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Financial has no effect on the direction of Washington Trust i.e., Washington Trust and Arrow Financial go up and down completely randomly.
Pair Corralation between Washington Trust and Arrow Financial
Given the investment horizon of 90 days Washington Trust is expected to generate 1.94 times less return on investment than Arrow Financial. In addition to that, Washington Trust is 1.1 times more volatile than Arrow Financial. It trades about 0.09 of its total potential returns per unit of risk. Arrow Financial is currently generating about 0.18 per unit of volatility. If you would invest 2,861 in Arrow Financial on August 23, 2024 and sell it today you would earn a total of 409.00 from holding Arrow Financial or generate 14.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Washington Trust Bancorp vs. Arrow Financial
Performance |
| Timeline |
| Washington Trust Bancorp |
| Arrow Financial |
Washington Trust and Arrow Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Washington Trust and Arrow Financial
The main advantage of trading using opposite Washington Trust and Arrow Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Washington Trust position performs unexpectedly, Arrow 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 Arrow Financial will offset losses from the drop in Arrow Financial's long position.| Washington Trust vs. Univest Pennsylvania | Washington Trust vs. Waterstone Financial | Washington Trust vs. Mid Penn Bancorp | Washington Trust vs. ST Bancorp |
| Arrow Financial vs. Waterstone Financial | Arrow Financial vs. Mid Penn Bancorp | Arrow Financial vs. ST Bancorp | Arrow Financial vs. Republic Bancorp |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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