Correlation Between Waterstone Financial and SouthState

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

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

Diversification Opportunities for Waterstone Financial and SouthState

0.62

Correlation Coefficient

Waterstone Financial  SouthState

Poor diversification

The 3 months correlation between Waterstone and SouthState is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Waterstone Financial and SouthState in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SouthState 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 SouthState. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SouthState has no effect on the direction of Waterstone Financial i.e., Waterstone Financial and SouthState go up and down completely randomly.

Pair Corralation between Waterstone Financial and SouthState

Given the investment horizon of 90 days Waterstone Financial is expected to under-perform the SouthState. But the stock apears to be less risky and, when comparing its historical volatility, Waterstone Financial is 1.19 times less risky than SouthState. The stock trades about -0.05 of its potential returns per unit of risk. The SouthState is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  9,530  in SouthState on October 10, 2024 and sell it today you would earn a total of  85.00  from holding SouthState or generate 0.89% 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.  SouthState

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 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.

SouthState

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SouthState are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, SouthState is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Waterstone Financial and SouthState

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

The idea behind Waterstone Financial and SouthState 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.