Correlation Between Western New and International Bancshares
Can any of the company-specific risk be diversified away by investing in both Western New and International 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 Western New and International Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western New England and International Bancshares, you can compare the effects of market volatilities on Western New and International 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 Western New with a short position of International Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western New and International Bancshares.
Diversification Opportunities for Western New and International Bancshares
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Western and International is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Western New England and International Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Bancshares and Western New 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 Western New England are associated (or correlated) with International Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Bancshares has no effect on the direction of Western New i.e., Western New and International Bancshares go up and down completely randomly.
Pair Corralation between Western New and International Bancshares
Given the investment horizon of 90 days Western New England is expected to generate 1.02 times more return on investment than International Bancshares. However, Western New is 1.02 times more volatile than International Bancshares. It trades about 0.22 of its potential returns per unit of risk. International Bancshares is currently generating about -0.12 per unit of risk. If you would invest 879.00 in Western New England on September 12, 2024 and sell it today you would earn a total of 55.00 from holding Western New England or generate 6.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western New England vs. International Bancshares
Performance |
| Timeline |
| Western New England |
| International Bancshares |
Western New and International Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western New and International Bancshares
The main advantage of trading using opposite Western New and International Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western New position performs unexpectedly, International 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 International Bancshares will offset losses from the drop in International Bancshares' long position.| Western New vs. IF Bancorp | Western New vs. Shore Bancshares | Western New vs. Colony Bankcorp | Western New vs. Investar Holding Corp |
| International Bancshares vs. JPMorgan Chase Co | International Bancshares vs. Citigroup | International Bancshares vs. Wells Fargo | International Bancshares vs. Toronto Dominion Bank |
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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