Correlation Between Washington Trust and FB Financial
Can any of the company-specific risk be diversified away by investing in both Washington Trust and FB 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 FB 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 FB Financial Corp, you can compare the effects of market volatilities on Washington Trust and FB 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 FB Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Washington Trust and FB Financial.
Diversification Opportunities for Washington Trust and FB Financial
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Washington and FBK is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Washington Trust Bancorp and FB Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FB Financial Corp 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 FB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FB Financial Corp has no effect on the direction of Washington Trust i.e., Washington Trust and FB Financial go up and down completely randomly.
Pair Corralation between Washington Trust and FB Financial
Given the investment horizon of 90 days Washington Trust Bancorp is expected to generate 1.23 times more return on investment than FB Financial. However, Washington Trust is 1.23 times more volatile than FB Financial Corp. It trades about 0.24 of its potential returns per unit of risk. FB Financial Corp is currently generating about 0.15 per unit of risk. If you would invest 3,006 in Washington Trust Bancorp on November 3, 2024 and sell it today you would earn a total of 271.00 from holding Washington Trust Bancorp or generate 9.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Washington Trust Bancorp vs. FB Financial Corp
Performance |
| Timeline |
| Washington Trust Bancorp |
| FB Financial Corp |
Washington Trust and FB Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Washington Trust and FB Financial
The main advantage of trading using opposite Washington Trust and FB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Washington Trust position performs unexpectedly, FB 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 FB Financial will offset losses from the drop in FB Financial's long position.| Washington Trust vs. US Bancorp | Washington Trust vs. Truist Financial Corp | Washington Trust vs. Fifth Third Bancorp | Washington Trust vs. KeyCorp |
| FB Financial vs. Home Bancorp | FB Financial vs. First Business Financial | FB Financial vs. LINKBANCORP | FB Financial vs. Great Southern 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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