Correlation Between Westamerica Bancorporation and First Community

Can any of the company-specific risk be diversified away by investing in both Westamerica Bancorporation and First Community 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 Westamerica Bancorporation and First Community into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Westamerica Bancorporation and First Community Bancshares, you can compare the effects of market volatilities on Westamerica Bancorporation and First Community 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 Westamerica Bancorporation with a short position of First Community. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westamerica Bancorporation and First Community.

Diversification Opportunities for Westamerica Bancorporation and First Community

0.89

Correlation Coefficient

Westamerica Bancorporation  First Community

Very poor diversification

The 3 months correlation between Westamerica and First is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Westamerica Bancorp. and First Community Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Community Banc and Westamerica 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 Westamerica Bancorporation are associated (or correlated) with First Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Community Banc has no effect on the direction of Westamerica Bancorporation i.e., Westamerica Bancorporation and First Community go up and down completely randomly.

Pair Corralation between Westamerica Bancorporation and First Community

Given the investment horizon of 90 days Westamerica Bancorporation is expected to generate 0.79 times more return on investment than First Community. However, Westamerica Bancorporation is 1.26 times less risky than First Community. It trades about 0.1 of its potential returns per unit of risk. First Community Bancshares is currently generating about 0.06 per unit of risk. If you would invest  5,100  in Westamerica Bancorporation on August 31, 2024 and sell it today you would earn a total of  654.00  from holding Westamerica Bancorporation or generate 12.82% return on investment over 90 days.

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

Westamerica Bancorp.  vs.  First Community Bancshares

Westamerica Bancorporation

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Westamerica Bancorporation are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting fundamental drivers, Westamerica Bancorporation exhibited solid returns over the last few months and may actually be approaching a breakup point.

First Community Banc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Community Bancshares are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental drivers, First Community may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Westamerica Bancorporation and First Community

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

The idea behind Westamerica Bancorporation and First Community Bancshares 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.