Correlation Between Mid Penn and Waterstone Financial

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

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

Diversification Opportunities for Mid Penn and Waterstone Financial

0.24

Correlation Coefficient

Mid Penn  Waterstone Financial

Modest diversification

The 3 months correlation between Mid and Waterstone is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Mid Penn Bancorp and Waterstone Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waterstone Financial and Mid Penn 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 Mid Penn Bancorp 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 Mid Penn i.e., Mid Penn and Waterstone Financial go up and down completely randomly.

Pair Corralation between Mid Penn and Waterstone Financial

Considering the 90-day investment horizon Mid Penn Bancorp is expected to under-perform the Waterstone Financial. But the stock apears to be less risky and, when comparing its historical volatility, Mid Penn Bancorp is 1.18 times less risky than Waterstone Financial. The stock trades about -0.11 of its potential returns per unit of risk. The Waterstone Financial is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,312  in Waterstone Financial on December 28, 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 Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Mid Penn Bancorp  vs.  Waterstone Financial

Mid Penn Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mid Penn Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company 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 Mid Penn and Waterstone Financial

The main advantage of trading using opposite Mid Penn and Waterstone Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Penn 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 Mid Penn Bancorp 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.

Check out your portfolio center.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.