Correlation Between Waterstone Financial and Financial Institutions
Can any of the company-specific risk be diversified away by investing in both Waterstone Financial and Financial Institutions 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 Financial Institutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waterstone Financial and Financial Institutions, you can compare the effects of market volatilities on Waterstone Financial and Financial Institutions 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 Financial Institutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waterstone Financial and Financial Institutions.
Diversification Opportunities for Waterstone Financial and Financial Institutions
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Waterstone and Financial is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Waterstone Financial and Financial Institutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Institutions 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 Financial Institutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Institutions has no effect on the direction of Waterstone Financial i.e., Waterstone Financial and Financial Institutions go up and down completely randomly.
Pair Corralation between Waterstone Financial and Financial Institutions
Given the investment horizon of 90 days Waterstone Financial is expected to generate 2.14 times less return on investment than Financial Institutions. But when comparing it to its historical volatility, Waterstone Financial is 1.14 times less risky than Financial Institutions. It trades about 0.04 of its potential returns per unit of risk. Financial Institutions is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,035 in Financial Institutions on August 25, 2024 and sell it today you would earn a total of 755.00 from holding Financial Institutions or generate 37.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Waterstone Financial vs. Financial Institutions
Performance |
| Timeline |
| Waterstone Financial |
| Financial Institutions |
Waterstone Financial and Financial Institutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waterstone Financial and Financial Institutions
The main advantage of trading using opposite Waterstone Financial and Financial Institutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waterstone Financial position performs unexpectedly, Financial Institutions 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 Financial Institutions will offset losses from the drop in Financial Institutions' 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 |
| Financial Institutions vs. First Community | Financial Institutions vs. Community West Bancshares | Financial Institutions vs. First Financial Northwest | Financial Institutions 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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