Correlation Between Waterstone Financial and Cambridge Bancorp
Can any of the company-specific risk be diversified away by investing in both Waterstone Financial and Cambridge Bancorp 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 Waterstone Financial and Cambridge Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waterstone Financial and Cambridge Bancorp, you can compare the effects of market volatilities on Waterstone Financial and Cambridge Bancorp 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 Waterstone Financial with a short position of Cambridge Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waterstone Financial and Cambridge Bancorp.
Diversification Opportunities for Waterstone Financial and Cambridge Bancorp
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Waterstone and Cambridge is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Waterstone Financial and Cambridge Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambridge Bancorp and Waterstone Financial 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 Waterstone Financial are associated (or correlated) with Cambridge Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cambridge Bancorp has no effect on the direction of Waterstone Financial i.e., Waterstone Financial and Cambridge Bancorp go up and down completely randomly.
Pair Corralation between Waterstone Financial and Cambridge Bancorp
Given the investment horizon of 90 days Waterstone Financial is expected to generate 3.38 times less return on investment than Cambridge Bancorp. But when comparing it to its historical volatility, Waterstone Financial is 1.47 times less risky than Cambridge Bancorp. It trades about 0.0 of its potential returns per unit of risk. Cambridge Bancorp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 7,658 in Cambridge Bancorp on August 31, 2024 and sell it today you would lose (299.00) from holding Cambridge Bancorp or give up 3.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 79.66% |
| Values | Daily Returns |
Waterstone Financial vs. Cambridge Bancorp
Performance |
| Timeline |
| Waterstone Financial |
| Cambridge Bancorp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Waterstone Financial and Cambridge Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waterstone Financial and Cambridge Bancorp
The main advantage of trading using opposite Waterstone Financial and Cambridge Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waterstone Financial position performs unexpectedly, Cambridge Bancorp 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 Cambridge Bancorp will offset losses from the drop in Cambridge Bancorp's long position.| Waterstone Financial vs. National Bank Holdings | Waterstone Financial vs. Community West Bancshares | Waterstone Financial vs. Financial Institutions | Waterstone Financial vs. Kearny Financial Corp |
| Cambridge Bancorp vs. First Community | Cambridge Bancorp vs. Community West Bancshares | Cambridge Bancorp vs. First Financial Northwest | Cambridge Bancorp vs. First Northwest 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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