Correlation Between Waterstone Financial and Home Bancorp
Can any of the company-specific risk be diversified away by investing in both Waterstone Financial and Home 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 Home 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 Home Bancorp, you can compare the effects of market volatilities on Waterstone Financial and Home 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 Home Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waterstone Financial and Home Bancorp.
Diversification Opportunities for Waterstone Financial and Home Bancorp
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Waterstone and Home is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Waterstone Financial and Home Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home 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 Home Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Bancorp has no effect on the direction of Waterstone Financial i.e., Waterstone Financial and Home Bancorp go up and down completely randomly.
Pair Corralation between Waterstone Financial and Home Bancorp
Given the investment horizon of 90 days Waterstone Financial is expected to generate 1.39 times more return on investment than Home Bancorp. However, Waterstone Financial is 1.39 times more volatile than Home Bancorp. It trades about 0.23 of its potential returns per unit of risk. Home Bancorp is currently generating about 0.2 per unit of risk. If you would invest 1,320 in Waterstone Financial on November 18, 2024 and sell it today you would earn a total of 150.00 from holding Waterstone Financial or generate 11.36% 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. Home Bancorp
Performance |
| Timeline |
| Waterstone Financial |
| Home Bancorp |
Waterstone Financial and Home Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waterstone Financial and Home Bancorp
The main advantage of trading using opposite Waterstone Financial and Home Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waterstone Financial position performs unexpectedly, Home 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 Home Bancorp will offset losses from the drop in Home 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 |
| Home Bancorp vs. Home Federal Bancorp | Home Bancorp vs. Community West Bancshares | Home Bancorp vs. First Financial Northwest | Home Bancorp 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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