Correlation Between Westamerica Bancorporation and Fifth Third

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

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

Diversification Opportunities for Westamerica Bancorporation and Fifth Third

0.18

Correlation Coefficient

Westamerica Bancorporation  Fifth Third

Average diversification

The 3 months correlation between Westamerica and Fifth is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Westamerica Bancorp. and Fifth Third Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fifth Third Bancorp and Westamerica Bancorporation 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 Westamerica Bancorporation are associated (or correlated) with Fifth Third. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fifth Third Bancorp has no effect on the direction of Westamerica Bancorporation i.e., Westamerica Bancorporation and Fifth Third go up and down completely randomly.

Pair Corralation between Westamerica Bancorporation and Fifth Third

Given the investment horizon of 90 days Westamerica Bancorporation is expected to generate 0.95 times more return on investment than Fifth Third. However, Westamerica Bancorporation is 1.05 times less risky than Fifth Third. It trades about -0.03 of its potential returns per unit of risk. Fifth Third Bancorp is currently generating about -0.09 per unit of risk. If you would invest  5,210  in Westamerica Bancorporation on December 30, 2024 and sell it today you would lose (175.00) from holding Westamerica Bancorporation or give up 3.36% of portfolio value over 90 days.

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

Westamerica Bancorp.  vs.  Fifth Third Bancorp

Westamerica Bancorporation

Risk-Adjusted Performance

Very Weak

Over the last 90 days Westamerica Bancorporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Westamerica Bancorporation is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Fifth Third Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fifth Third 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 current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Westamerica Bancorporation and Fifth Third

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

The idea behind Westamerica Bancorporation and Fifth Third 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.