Correlation Between Moelis and Waterstone Financial

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

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

Diversification Opportunities for Moelis and Waterstone Financial

-0.02

Correlation Coefficient

Moelis  Waterstone Financial

Good diversification

The 3 months correlation between Moelis and Waterstone is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Moelis Co and Waterstone Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waterstone Financial and Moelis 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 Moelis Co 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 Moelis i.e., Moelis and Waterstone Financial go up and down completely randomly.

Pair Corralation between Moelis and Waterstone Financial

Allowing for the 90-day total investment horizon Moelis Co is expected to under-perform the Waterstone Financial. In addition to that, Moelis is 1.13 times more volatile than Waterstone Financial. It trades about -0.15 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

Moelis Co  vs.  Waterstone Financial

Moelis

Risk-Adjusted Performance

Very Weak

Over the last 90 days Moelis Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 Moelis and Waterstone Financial

The main advantage of trading using opposite Moelis and Waterstone Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Moelis 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 Moelis Co 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.