Correlation Between Regions Financial and Washington Trust

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

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

Diversification Opportunities for Regions Financial and Washington Trust

0.94

Correlation Coefficient

Regions Financial  Washington Trust

Almost no diversification

The 3 months correlation between Regions and Washington is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Regions Financial and Washington Trust Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Washington Trust Bancorp and Regions 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 Regions Financial are associated (or correlated) with Washington Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Washington Trust Bancorp has no effect on the direction of Regions Financial i.e., Regions Financial and Washington Trust go up and down completely randomly.

Pair Corralation between Regions Financial and Washington Trust

Allowing for the 90-day total investment horizon Regions Financial is expected to generate 0.72 times more return on investment than Washington Trust. However, Regions Financial is 1.4 times less risky than Washington Trust. It trades about -0.12 of its potential returns per unit of risk. Washington Trust Bancorp is currently generating about -0.09 per unit of risk. If you would invest  2,653  in Regions Financial on November 30, 2024 and sell it today you would lose (282.00) from holding Regions Financial or give up 10.63% of portfolio value over 90 days.

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

Regions Financial  vs.  Washington Trust Bancorp

Regions Financial

Risk-Adjusted Performance

Very Weak

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

Washington Trust Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Washington Trust Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Regions Financial and Washington Trust

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

The idea behind Regions Financial and Washington Trust 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.