Correlation Between WesBanco and First Western
Can any of the company-specific risk be diversified away by investing in both WesBanco and First Western 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 WesBanco and First Western into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WesBanco and First Western Financial, you can compare the effects of market volatilities on WesBanco and First Western 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 WesBanco with a short position of First Western. Check out your portfolio center. Please also check ongoing floating volatility patterns of WesBanco and First Western.
Diversification Opportunities for WesBanco and First Western
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between WesBanco and First is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding WesBanco and First Western Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Western Financial and WesBanco 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 WesBanco are associated (or correlated) with First Western. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Western Financial has no effect on the direction of WesBanco i.e., WesBanco and First Western go up and down completely randomly.
Pair Corralation between WesBanco and First Western
Assuming the 90 days horizon WesBanco is expected to generate 0.47 times more return on investment than First Western. However, WesBanco is 2.11 times less risky than First Western. It trades about 0.03 of its potential returns per unit of risk. First Western Financial is currently generating about -0.01 per unit of risk. If you would invest 2,215 in WesBanco on August 27, 2024 and sell it today you would earn a total of 309.00 from holding WesBanco or generate 13.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WesBanco vs. First Western Financial
Performance |
| Timeline |
| WesBanco |
| First Western Financial |
WesBanco and First Western Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WesBanco and First Western
The main advantage of trading using opposite WesBanco and First Western positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WesBanco position performs unexpectedly, First Western 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 Western will offset losses from the drop in First Western's long position.The idea behind WesBanco and First Western Financial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| First Western vs. Home Federal Bancorp | First Western vs. First Financial Northwest | First Western vs. First Northwest Bancorp | First Western vs. First Capital |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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