Correlation Between Washington Trust and Northwest Bancshares
Can any of the company-specific risk be diversified away by investing in both Washington Trust and Northwest Bancshares 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 Northwest Bancshares 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 Northwest Bancshares, you can compare the effects of market volatilities on Washington Trust and Northwest Bancshares 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 Northwest Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Washington Trust and Northwest Bancshares.
Diversification Opportunities for Washington Trust and Northwest Bancshares
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Washington and Northwest is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Washington Trust Bancorp and Northwest Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northwest Bancshares 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 Northwest Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northwest Bancshares has no effect on the direction of Washington Trust i.e., Washington Trust and Northwest Bancshares go up and down completely randomly.
Pair Corralation between Washington Trust and Northwest Bancshares
Given the investment horizon of 90 days Washington Trust is expected to generate 1.27 times less return on investment than Northwest Bancshares. In addition to that, Washington Trust is 1.11 times more volatile than Northwest Bancshares. It trades about 0.12 of its total potential returns per unit of risk. Northwest Bancshares is currently generating about 0.17 per unit of volatility. If you would invest 1,311 in Northwest Bancshares on September 1, 2024 and sell it today you would earn a total of 157.00 from holding Northwest Bancshares or generate 11.98% 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. Northwest Bancshares
Performance |
| Timeline |
| Washington Trust Bancorp |
| Northwest Bancshares |
Washington Trust and Northwest Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Washington Trust and Northwest Bancshares
The main advantage of trading using opposite Washington Trust and Northwest Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Washington Trust position performs unexpectedly, Northwest Bancshares 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 Northwest Bancshares will offset losses from the drop in Northwest Bancshares' long position.| Washington Trust vs. Univest Pennsylvania | Washington Trust vs. Waterstone Financial | Washington Trust vs. Mid Penn Bancorp | Washington Trust vs. ST Bancorp |
| Northwest Bancshares vs. ST Bancorp | Northwest Bancshares vs. CrossFirst Bankshares | Northwest Bancshares vs. Enterprise Financial Services | Northwest Bancshares vs. The First Bancshares, |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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