Correlation Between Washington Trust and Towne Bank
Can any of the company-specific risk be diversified away by investing in both Washington Trust and Towne Bank 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 Towne Bank 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 Towne Bank, you can compare the effects of market volatilities on Washington Trust and Towne Bank 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 Towne Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Washington Trust and Towne Bank.
Diversification Opportunities for Washington Trust and Towne Bank
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Washington and Towne is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Washington Trust Bancorp and Towne Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Towne Bank 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 Towne Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Towne Bank has no effect on the direction of Washington Trust i.e., Washington Trust and Towne Bank go up and down completely randomly.
Pair Corralation between Washington Trust and Towne Bank
Given the investment horizon of 90 days Washington Trust Bancorp is expected to generate 1.37 times more return on investment than Towne Bank. However, Washington Trust is 1.37 times more volatile than Towne Bank. It trades about 0.11 of its potential returns per unit of risk. Towne Bank is currently generating about 0.1 per unit of risk. If you would invest 2,427 in Washington Trust Bancorp on August 27, 2024 and sell it today you would earn a total of 1,314 from holding Washington Trust Bancorp or generate 54.14% 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. Towne Bank
Performance |
| Timeline |
| Washington Trust Bancorp |
| Towne Bank |
Washington Trust and Towne Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Washington Trust and Towne Bank
The main advantage of trading using opposite Washington Trust and Towne Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Washington Trust position performs unexpectedly, Towne Bank 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 Towne Bank will offset losses from the drop in Towne Bank's long position.| Washington Trust vs. Univest Pennsylvania | Washington Trust vs. Waterstone Financial | Washington Trust vs. Mid Penn Bancorp | Washington Trust vs. ST Bancorp |
| Towne Bank vs. Penns Woods Bancorp | Towne Bank vs. 1st Source | Towne Bank vs. Great Southern Bancorp | Towne Bank vs. Waterstone Financial |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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