Correlation Between Westamerica Bancorporation and POSBO UNSPADRS20YC1

Can any of the company-specific risk be diversified away by investing in both Westamerica Bancorporation and POSBO UNSPADRS20YC1 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 POSBO UNSPADRS20YC1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Westamerica Bancorporation and POSBO UNSPADRS20YC1, you can compare the effects of market volatilities on Westamerica Bancorporation and POSBO UNSPADRS20YC1 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 POSBO UNSPADRS20YC1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westamerica Bancorporation and POSBO UNSPADRS20YC1.

Diversification Opportunities for Westamerica Bancorporation and POSBO UNSPADRS20YC1

-0.3

Correlation Coefficient

Westamerica Bancorporation  POSBO UNSPADRS20YC1

Very good diversification

The 3 months correlation between Westamerica and POSBO is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Westamerica Bancorp. and POSBO UNSPADRS20YC1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSBO UNSPADRS20YC1 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 POSBO UNSPADRS20YC1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POSBO UNSPADRS20YC1 has no effect on the direction of Westamerica Bancorporation i.e., Westamerica Bancorporation and POSBO UNSPADRS20YC1 go up and down completely randomly.

Pair Corralation between Westamerica Bancorporation and POSBO UNSPADRS20YC1

Assuming the 90 days horizon Westamerica Bancorporation is expected to under-perform the POSBO UNSPADRS20YC1. But the stock apears to be less risky and, when comparing its historical volatility, Westamerica Bancorporation is 1.22 times less risky than POSBO UNSPADRS20YC1. The stock trades about -0.4 of its potential returns per unit of risk. The POSBO UNSPADRS20YC1 is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,060  in POSBO UNSPADRS20YC1 on September 28, 2024 and sell it today you would earn a total of  20.00  from holding POSBO UNSPADRS20YC1 or generate 1.89% return on investment over 90 days.

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

Westamerica Bancorp.  vs.  POSBO UNSPADRS20YC1

Westamerica Bancorporation

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Westamerica Bancorporation are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Westamerica Bancorporation reported solid returns over the last few months and may actually be approaching a breakup point.

POSBO UNSPADRS20YC1

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in POSBO UNSPADRS20YC1 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental drivers, POSBO UNSPADRS20YC1 is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Westamerica Bancorporation and POSBO UNSPADRS20YC1

The main advantage of trading using opposite Westamerica Bancorporation and POSBO UNSPADRS20YC1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westamerica Bancorporation position performs unexpectedly, POSBO UNSPADRS20YC1 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 POSBO UNSPADRS20YC1 will offset losses from the drop in POSBO UNSPADRS20YC1's long position.

The idea behind Westamerica Bancorporation and POSBO UNSPADRS20YC1 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 Anywhere module to track or share privately all of your investments from the convenience of any device.