Correlation Between WesBanco and Hawthorn Bancshares

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

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

Diversification Opportunities for WesBanco and Hawthorn Bancshares

0.86

Correlation Coefficient

WesBanco  Hawthorn Bancshares

Very poor diversification

The 3 months correlation between WesBanco and Hawthorn is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding WesBanco and Hawthorn Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hawthorn Bancshares and WesBanco 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 WesBanco are associated (or correlated) with Hawthorn Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hawthorn Bancshares has no effect on the direction of WesBanco i.e., WesBanco and Hawthorn Bancshares go up and down completely randomly.

Pair Corralation between WesBanco and Hawthorn Bancshares

Assuming the 90 days horizon WesBanco is expected to generate 0.09 times more return on investment than Hawthorn Bancshares. However, WesBanco is 11.57 times less risky than Hawthorn Bancshares. It trades about 0.0 of its potential returns per unit of risk. Hawthorn Bancshares is currently generating about -0.15 per unit of risk. If you would invest  2,530  in WesBanco on October 8, 2024 and sell it today you would earn a total of  0.00  from holding WesBanco or generate 0.0% return on investment over 90 days.

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

WesBanco  vs.  Hawthorn Bancshares

WesBanco

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WesBanco are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, WesBanco is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Hawthorn Bancshares

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hawthorn Bancshares are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady fundamental drivers, Hawthorn Bancshares disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WesBanco and Hawthorn Bancshares

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

The idea behind WesBanco and Hawthorn Bancshares 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.