Correlation Between Washington Trust and Simmons First

Can any of the company-specific risk be diversified away by investing in both Washington Trust and Simmons First 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 Simmons First 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 Simmons First National, you can compare the effects of market volatilities on Washington Trust and Simmons First 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 Simmons First. Check out your portfolio center. Please also check ongoing floating volatility patterns of Washington Trust and Simmons First.

Diversification Opportunities for Washington Trust and Simmons First

0.96

Correlation Coefficient

Washington Trust  Simmons First

Almost no diversification

The 3 months correlation between Washington and Simmons is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Washington Trust Bancorp and Simmons First National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simmons First National 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 Simmons First. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simmons First National has no effect on the direction of Washington Trust i.e., Washington Trust and Simmons First go up and down completely randomly.

Pair Corralation between Washington Trust and Simmons First

Given the investment horizon of 90 days Washington Trust Bancorp is expected to under-perform the Simmons First. In addition to that, Washington Trust is 1.41 times more volatile than Simmons First National. It trades about -0.33 of its total potential returns per unit of risk. Simmons First National is currently generating about -0.19 per unit of volatility. If you would invest  2,498  in Simmons First National on September 13, 2024 and sell it today you would lose (80.00) from holding Simmons First National or give up 3.2% of portfolio value over 90 days.

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

Washington Trust Bancorp  vs.  Simmons First National

Washington Trust Bancorp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Washington Trust Bancorp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Washington Trust demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Simmons First National

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Simmons First National are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Simmons First exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Washington Trust and Simmons First

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

The idea behind Washington Trust Bancorp and Simmons First National 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.