Correlation Between Westamerica Bancorporation and Marsh McLennan

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

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

Diversification Opportunities for Westamerica Bancorporation and Marsh McLennan

0.59

Correlation Coefficient

Westamerica Bancorporation  Marsh McLennan

Very weak diversification

The 3 months correlation between Westamerica and Marsh is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Westamerica Bancorp. and Marsh McLennan Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marsh McLennan Companies 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 Marsh McLennan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marsh McLennan Companies has no effect on the direction of Westamerica Bancorporation i.e., Westamerica Bancorporation and Marsh McLennan go up and down completely randomly.

Pair Corralation between Westamerica Bancorporation and Marsh McLennan

Assuming the 90 days horizon Westamerica Bancorporation is expected to generate 2.66 times more return on investment than Marsh McLennan. However, Westamerica Bancorporation is 2.66 times more volatile than Marsh McLennan Companies. It trades about 0.07 of its potential returns per unit of risk. Marsh McLennan Companies is currently generating about -0.02 per unit of risk. If you would invest  4,378  in Westamerica Bancorporation on October 15, 2024 and sell it today you would earn a total of  442.00  from holding Westamerica Bancorporation or generate 10.1% return on investment over 90 days.

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

Westamerica Bancorp.  vs.  Marsh McLennan Companies

Westamerica Bancorporation

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Westamerica Bancorporation are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Westamerica Bancorporation reported solid returns over the last few months and may actually be approaching a breakup point.

Marsh McLennan Companies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marsh McLennan Companies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Marsh McLennan 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 Marsh McLennan

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

The idea behind Westamerica Bancorporation and Marsh McLennan Companies 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..