Correlation Between Waterstone Financial and HV Bancorp

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

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

Diversification Opportunities for Waterstone Financial and HV Bancorp

-0.23

Correlation Coefficient

Waterstone Financial  HV Bancorp

Very good diversification

The 3 months correlation between Waterstone and HVBC is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Waterstone Financial and HV Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HV Bancorp and Waterstone Financial 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 Waterstone Financial are associated (or correlated) with HV Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HV Bancorp has no effect on the direction of Waterstone Financial i.e., Waterstone Financial and HV Bancorp go up and down completely randomly.

Pair Corralation between Waterstone Financial and HV Bancorp

Given the investment horizon of 90 days Waterstone Financial is expected to generate 28.33 times less return on investment than HV Bancorp. But when comparing it to its historical volatility, Waterstone Financial is 1.11 times less risky than HV Bancorp. It trades about 0.0 of its potential returns per unit of risk. HV Bancorp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,844  in HV Bancorp on September 20, 2024 and sell it today you would earn a total of  616.00  from holding HV Bancorp or generate 21.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	23.64%
Values	Daily Returns

Waterstone Financial  vs.  HV Bancorp

Waterstone Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Waterstone Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

HV Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HV Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, HV Bancorp is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Waterstone Financial and HV Bancorp

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

The idea behind Waterstone Financial and HV 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 Commodity Directory module to find actively traded commodities issued by global exchanges.