Correlation Between Waterstone Financial and Popular

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

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

Diversification Opportunities for Waterstone Financial and Popular

0.05

Correlation Coefficient

Waterstone Financial  Popular

Significant diversification

The 3 months correlation between Waterstone and Popular is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Waterstone Financial and Popular in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Popular 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 Popular. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Popular has no effect on the direction of Waterstone Financial i.e., Waterstone Financial and Popular go up and down completely randomly.

Pair Corralation between Waterstone Financial and Popular

Given the investment horizon of 90 days Waterstone Financial is expected to generate 15.27 times less return on investment than Popular. But when comparing it to its historical volatility, Waterstone Financial is 2.46 times less risky than Popular. It trades about 0.0 of its potential returns per unit of risk. Popular is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,199  in Popular on September 18, 2024 and sell it today you would earn a total of  203.00  from holding Popular or generate 9.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	75.35%
Values	Daily Returns

Waterstone Financial  vs.  Popular

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.

Popular

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Popular has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Popular is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Waterstone Financial and Popular

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

The idea behind Waterstone Financial and Popular 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.