Correlation Between West Bancorporation and MidWestOne Financial
Can any of the company-specific risk be diversified away by investing in both West Bancorporation and MidWestOne Financial 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 West Bancorporation and MidWestOne Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between West Bancorporation and MidWestOne Financial Group, you can compare the effects of market volatilities on West Bancorporation and MidWestOne Financial 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 West Bancorporation with a short position of MidWestOne Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of West Bancorporation and MidWestOne Financial.
Diversification Opportunities for West Bancorporation and MidWestOne Financial
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between West and MidWestOne is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding West Bancorp. and MidWestOne Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MidWestOne Financial and West Bancorporation 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 West Bancorporation are associated (or correlated) with MidWestOne Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MidWestOne Financial has no effect on the direction of West Bancorporation i.e., West Bancorporation and MidWestOne Financial go up and down completely randomly.
Pair Corralation between West Bancorporation and MidWestOne Financial
Given the investment horizon of 90 days West Bancorporation is expected to generate 1.19 times less return on investment than MidWestOne Financial. In addition to that, West Bancorporation is 1.04 times more volatile than MidWestOne Financial Group. It trades about 0.13 of its total potential returns per unit of risk. MidWestOne Financial Group is currently generating about 0.16 per unit of volatility. If you would invest 2,100 in MidWestOne Financial Group on September 1, 2024 and sell it today you would earn a total of 1,195 from holding MidWestOne Financial Group or generate 56.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
West Bancorp. vs. MidWestOne Financial Group
Performance |
| Timeline |
| West Bancorporation |
| MidWestOne Financial |
West Bancorporation and MidWestOne Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with West Bancorporation and MidWestOne Financial
The main advantage of trading using opposite West Bancorporation and MidWestOne Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if West Bancorporation position performs unexpectedly, MidWestOne Financial 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 MidWestOne Financial will offset losses from the drop in MidWestOne Financial's long position.| West Bancorporation vs. MidWestOne Financial Group | West Bancorporation vs. Washington Trust Bancorp | West Bancorporation vs. Univest Pennsylvania | West Bancorporation vs. Sierra Bancorp |
| MidWestOne Financial vs. Home Federal Bancorp | MidWestOne Financial vs. Lake Shore Bancorp | MidWestOne Financial vs. Community West Bancshares | MidWestOne Financial 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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