Correlation Between Colony Bankcorp and Waterstone Financial

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

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

Diversification Opportunities for Colony Bankcorp and Waterstone Financial

0.91

Correlation Coefficient

Colony Bankcorp  Waterstone Financial

Almost no diversification

The 3 months correlation between Colony and Waterstone is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Colony Bankcorp and Waterstone Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waterstone Financial and Colony Bankcorp 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 Colony Bankcorp 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 Colony Bankcorp i.e., Colony Bankcorp and Waterstone Financial go up and down completely randomly.

Pair Corralation between Colony Bankcorp and Waterstone Financial

Given the investment horizon of 90 days Colony Bankcorp is expected to under-perform the Waterstone Financial. In addition to that, Colony Bankcorp is 1.03 times more volatile than Waterstone Financial. It trades about -0.2 of its total potential returns per unit of risk. Waterstone Financial is currently generating about -0.04 per unit of volatility. If you would invest  1,367  in Waterstone Financial on December 10, 2024 and sell it today you would lose (20.00) from holding Waterstone Financial or give up 1.46% of portfolio value over 90 days.

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

Colony Bankcorp  vs.  Waterstone Financial

Colony Bankcorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Colony Bankcorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Waterstone Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Waterstone Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Colony Bankcorp and Waterstone Financial

The main advantage of trading using opposite Colony Bankcorp and Waterstone Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Colony Bankcorp 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 Colony Bankcorp 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.