Correlation Between Washington Trust and Banner

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

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

Diversification Opportunities for Washington Trust and Banner

0.79

Correlation Coefficient

Washington Trust  Banner

Poor diversification

The 3 months correlation between Washington and Banner is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Washington Trust Bancorp and Banner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banner and Washington Trust 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 Washington Trust Bancorp are associated (or correlated) with Banner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banner has no effect on the direction of Washington Trust i.e., Washington Trust and Banner go up and down completely randomly.

Pair Corralation between Washington Trust and Banner

Given the investment horizon of 90 days Washington Trust Bancorp is expected to under-perform the Banner. In addition to that, Washington Trust is 1.17 times more volatile than Banner. It trades about -0.04 of its total potential returns per unit of risk. Banner is currently generating about 0.02 per unit of volatility. If you would invest  6,459  in Banner on October 15, 2024 and sell it today you would earn a total of  41.00  from holding Banner or generate 0.63% return on investment over 90 days.

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

Washington Trust Bancorp  vs.  Banner

Washington Trust Bancorp

Risk-Adjusted Performance

0 of 100

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.

Banner

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Banner are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Banner is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Washington Trust and Banner

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

The idea behind Washington Trust Bancorp and Banner 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.