Correlation Between Guild Holdings and Waterstone Financial

Can any of the company-specific risk be diversified away by investing in both Guild Holdings and Waterstone 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 Guild Holdings and Waterstone Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guild Holdings Co and Waterstone Financial, you can compare the effects of market volatilities on Guild Holdings and Waterstone 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 Guild Holdings with a short position of Waterstone Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guild Holdings and Waterstone Financial.

Diversification Opportunities for Guild Holdings and Waterstone Financial

-0.24

Correlation Coefficient

Guild Holdings  Waterstone Financial

Very good diversification

The 3 months correlation between Guild and Waterstone is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Guild Holdings Co and Waterstone Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waterstone Financial and Guild Holdings 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 Guild Holdings Co are associated (or correlated) with Waterstone Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waterstone Financial has no effect on the direction of Guild Holdings i.e., Guild Holdings and Waterstone Financial go up and down completely randomly.

Pair Corralation between Guild Holdings and Waterstone Financial

Given the investment horizon of 90 days Guild Holdings Co is expected to under-perform the Waterstone Financial. But the stock apears to be less risky and, when comparing its historical volatility, Guild Holdings Co is 1.23 times less risky than Waterstone Financial. The stock trades about -0.21 of its potential returns per unit of risk. The Waterstone Financial is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,564  in Waterstone Financial on September 18, 2024 and sell it today you would lose (97.00) from holding Waterstone Financial or give up 6.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Guild Holdings Co  vs.  Waterstone Financial

Guild Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guild Holdings Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Waterstone Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Waterstone Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, Waterstone Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Guild Holdings and Waterstone Financial

The main advantage of trading using opposite Guild Holdings and Waterstone Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guild Holdings position performs unexpectedly, Waterstone 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 Waterstone Financial will offset losses from the drop in Waterstone Financial's long position.

The idea behind Guild Holdings Co and Waterstone Financial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.