Correlation Between Waterstone Financial and Republic Bancorp

Can any of the company-specific risk be diversified away by investing in both Waterstone Financial and Republic 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 Republic 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 Republic Bancorp, you can compare the effects of market volatilities on Waterstone Financial and Republic 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 Republic Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waterstone Financial and Republic Bancorp.

Diversification Opportunities for Waterstone Financial and Republic Bancorp

0.69

Correlation Coefficient

Waterstone Financial  Republic Bancorp

Poor diversification

The 3 months correlation between Waterstone and Republic is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Waterstone Financial and Republic Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Republic 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 Republic Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Republic Bancorp has no effect on the direction of Waterstone Financial i.e., Waterstone Financial and Republic Bancorp go up and down completely randomly.

Pair Corralation between Waterstone Financial and Republic Bancorp

Given the investment horizon of 90 days Waterstone Financial is expected to generate 4.78 times less return on investment than Republic Bancorp. But when comparing it to its historical volatility, Waterstone Financial is 1.2 times less risky than Republic Bancorp. It trades about 0.03 of its potential returns per unit of risk. Republic Bancorp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  6,267  in Republic Bancorp on September 1, 2024 and sell it today you would earn a total of  1,361  from holding Republic Bancorp or generate 21.72% return on investment over 90 days.

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

Waterstone Financial  vs.  Republic Bancorp

Waterstone Financial

Risk-Adjusted Performance

2 of 100

Weak

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

Republic Bancorp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Republic Bancorp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Republic Bancorp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Waterstone Financial and Republic Bancorp

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

The idea behind Waterstone Financial and Republic 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.