Correlation Between SouthState and Waterstone Financial

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

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

Diversification Opportunities for SouthState and Waterstone Financial

0.41

Correlation Coefficient

SouthState  Waterstone Financial

Very weak diversification

The 3 months correlation between SouthState and Waterstone is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding SouthState and Waterstone Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waterstone Financial and SouthState 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 SouthState 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 SouthState i.e., SouthState and Waterstone Financial go up and down completely randomly.

Pair Corralation between SouthState and Waterstone Financial

Considering the 90-day investment horizon SouthState is expected to under-perform the Waterstone Financial. But the stock apears to be less risky and, when comparing its historical volatility, SouthState is 1.04 times less risky than Waterstone Financial. The stock trades about -0.07 of its potential returns per unit of risk. The Waterstone Financial is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,329  in Waterstone Financial on December 22, 2024 and sell it today you would earn a total of  17.00  from holding Waterstone Financial or generate 1.28% return on investment over 90 days.

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

SouthState  vs.  Waterstone Financial

SouthState

Risk-Adjusted Performance

Very Weak

Over the last 90 days SouthState 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 1 (%) 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 SouthState and Waterstone Financial

The main advantage of trading using opposite SouthState and Waterstone Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SouthState 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 SouthState 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.