Correlation Between SpareBank and Watsco

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

By analyzing existing cross correlation between SpareBank 1 SR Bank and Watsco Inc, you can compare the effects of market volatilities on SpareBank and Watsco 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 SpareBank with a short position of Watsco. Check out your portfolio center. Please also check ongoing floating volatility patterns of SpareBank and Watsco.

Diversification Opportunities for SpareBank and Watsco

0.0

Correlation Coefficient

SpareBank  Watsco

Pay attention - limited upside

The 3 months correlation between SpareBank and Watsco is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding SpareBank 1 SR Bank and Watsco Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Watsco Inc and SpareBank 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 SpareBank 1 SR Bank are associated (or correlated) with Watsco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Watsco Inc has no effect on the direction of SpareBank i.e., SpareBank and Watsco go up and down completely randomly.

Pair Corralation between SpareBank and Watsco

If you would invest  1,465  in SpareBank 1 SR Bank on September 25, 2024 and sell it today you would earn a total of  0.00  from holding SpareBank 1 SR Bank or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

SpareBank 1 SR Bank  vs.  Watsco Inc

SpareBank 1 SR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SpareBank 1 SR Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking signals, SpareBank is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Watsco Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Watsco Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Watsco is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with SpareBank and Watsco

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

The idea behind SpareBank 1 SR Bank and Watsco Inc 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.