Correlation Between Waterstone Financial and Rhinebeck Bancorp

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

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

Diversification Opportunities for Waterstone Financial and Rhinebeck Bancorp

-0.15

Correlation Coefficient

Waterstone Financial  Rhinebeck Bancorp

Good diversification

The 3 months correlation between Waterstone and Rhinebeck is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Waterstone Financial and Rhinebeck Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rhinebeck 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 Rhinebeck Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rhinebeck Bancorp has no effect on the direction of Waterstone Financial i.e., Waterstone Financial and Rhinebeck Bancorp go up and down completely randomly.

Pair Corralation between Waterstone Financial and Rhinebeck Bancorp

Given the investment horizon of 90 days Waterstone Financial is expected to under-perform the Rhinebeck Bancorp. In addition to that, Waterstone Financial is 1.19 times more volatile than Rhinebeck Bancorp. It trades about -0.04 of its total potential returns per unit of risk. Rhinebeck Bancorp is currently generating about 0.15 per unit of volatility. If you would invest  820.00  in Rhinebeck Bancorp on September 18, 2024 and sell it today you would earn a total of  136.00  from holding Rhinebeck Bancorp or generate 16.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Waterstone Financial  vs.  Rhinebeck Bancorp

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.

Rhinebeck Bancorp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rhinebeck Bancorp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting forward-looking signals, Rhinebeck Bancorp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Waterstone Financial and Rhinebeck Bancorp

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

The idea behind Waterstone Financial and Rhinebeck Bancorp 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.