Correlation Between Washington Trust and First Business
Can any of the company-specific risk be diversified away by investing in both Washington Trust and First Business 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 First Business 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 First Business Financial, you can compare the effects of market volatilities on Washington Trust and First Business 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 First Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Washington Trust and First Business.
Diversification Opportunities for Washington Trust and First Business
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Washington and First is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Washington Trust Bancorp and First Business Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Business 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 First Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Business Financial has no effect on the direction of Washington Trust i.e., Washington Trust and First Business go up and down completely randomly.
Pair Corralation between Washington Trust and First Business
Given the investment horizon of 90 days Washington Trust Bancorp is expected to generate 1.15 times more return on investment than First Business. However, Washington Trust is 1.15 times more volatile than First Business Financial. It trades about 0.13 of its potential returns per unit of risk. First Business Financial is currently generating about 0.15 per unit of risk. If you would invest 2,472 in Washington Trust Bancorp on September 1, 2024 and sell it today you would earn a total of 1,242 from holding Washington Trust Bancorp or generate 50.24% 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. First Business Financial
Performance |
| Timeline |
| Washington Trust Bancorp |
| First Business Financial |
Washington Trust and First Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Washington Trust and First Business
The main advantage of trading using opposite Washington Trust and First Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Washington Trust position performs unexpectedly, First Business 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 First Business will offset losses from the drop in First Business' long position.| Washington Trust vs. Univest Pennsylvania | Washington Trust vs. Waterstone Financial | Washington Trust vs. Mid Penn Bancorp | Washington Trust vs. ST Bancorp |
| First Business vs. Affinity Bancshares | First Business vs. Southern California Bancorp | First Business vs. Auburn National Bancorporation | First Business vs. BayCom 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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