Correlation Between Westbury Bancorp and Merchants Bancorp

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

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

Diversification Opportunities for Westbury Bancorp and Merchants Bancorp

-0.36

Correlation Coefficient

Westbury Bancorp  Merchants Bancorp

Very good diversification

The 3 months correlation between Westbury and Merchants is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Westbury Bancorp and Merchants Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants Bancorp and Westbury Bancorp 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 Westbury Bancorp are associated (or correlated) with Merchants Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merchants Bancorp has no effect on the direction of Westbury Bancorp i.e., Westbury Bancorp and Merchants Bancorp go up and down completely randomly.

Pair Corralation between Westbury Bancorp and Merchants Bancorp

If you would invest  2,524  in Merchants Bancorp on September 4, 2024 and sell it today you would earn a total of  96.00  from holding Merchants Bancorp or generate 3.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Westbury Bancorp  vs.  Merchants Bancorp

Westbury Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Westbury Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental drivers, Westbury Bancorp is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Merchants Bancorp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Merchants Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Merchants Bancorp is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Westbury Bancorp and Merchants Bancorp

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

The idea behind Westbury Bancorp and Merchants 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.