Correlation Between Waterstone Financial and Washington Trust
Can any of the company-specific risk be diversified away by investing in both Waterstone Financial and Washington Trust 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 Washington Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waterstone Financial and Washington Trust Bancorp, you can compare the effects of market volatilities on Waterstone Financial and Washington Trust 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 Washington Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waterstone Financial and Washington Trust.
Diversification Opportunities for Waterstone Financial and Washington Trust
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Waterstone and Washington is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Waterstone Financial and Washington Trust Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Washington Trust 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 Washington Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Washington Trust Bancorp has no effect on the direction of Waterstone Financial i.e., Waterstone Financial and Washington Trust go up and down completely randomly.
Pair Corralation between Waterstone Financial and Washington Trust
Given the investment horizon of 90 days Waterstone Financial is expected to generate 2.37 times less return on investment than Washington Trust. But when comparing it to its historical volatility, Waterstone Financial is 1.41 times less risky than Washington Trust. It trades about 0.05 of its potential returns per unit of risk. Washington Trust Bancorp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 3,541 in Washington Trust Bancorp on August 27, 2024 and sell it today you would earn a total of 200.00 from holding Washington Trust Bancorp or generate 5.65% 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. Washington Trust Bancorp
Performance |
| Timeline |
| Waterstone Financial |
| Washington Trust Bancorp |
Waterstone Financial and Washington Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waterstone Financial and Washington Trust
The main advantage of trading using opposite Waterstone Financial and Washington Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waterstone Financial position performs unexpectedly, Washington Trust 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 Washington Trust will offset losses from the drop in Washington Trust'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 |
| Washington Trust vs. Univest Pennsylvania | Washington Trust vs. Waterstone Financial | Washington Trust vs. Mid Penn Bancorp | Washington Trust vs. ST 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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