Correlation Between Lion Financial and Waterstone Financial

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

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

Diversification Opportunities for Lion Financial and Waterstone Financial

-0.65

Correlation Coefficient

Lion Financial  Waterstone Financial

Excellent diversification

The 3 months correlation between Lion and Waterstone is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Lion Financial Group and Waterstone Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waterstone Financial and Lion 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 Lion Financial Group 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 Lion Financial i.e., Lion Financial and Waterstone Financial go up and down completely randomly.

Pair Corralation between Lion Financial and Waterstone Financial

Assuming the 90 days horizon Lion Financial Group is expected to under-perform the Waterstone Financial. In addition to that, Lion Financial is 3.58 times more volatile than Waterstone Financial. It trades about -0.01 of its total potential returns per unit of risk. Waterstone Financial is currently generating about 0.03 per unit of volatility. If you would invest  1,312  in Waterstone Financial on December 29, 2024 and sell it today you would earn a total of  34.00  from holding Waterstone Financial or generate 2.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Lion Financial Group  vs.  Waterstone Financial

Lion Financial Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lion Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Lion Financial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Waterstone Financial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Waterstone Financial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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 Lion Financial and Waterstone Financial

The main advantage of trading using opposite Lion Financial and Waterstone Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lion Financial 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 Lion Financial Group 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.