Correlation Between Waterstone Financial and ST Bancorp

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

Diversification Opportunities for Waterstone Financial and ST Bancorp

0.59

Correlation Coefficient

Waterstone Financial  ST Bancorp

Very weak diversification

The 3 months correlation between Waterstone and STBA is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Waterstone Financial and ST Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ST 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 ST Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ST Bancorp has no effect on the direction of Waterstone Financial i.e., Waterstone Financial and ST Bancorp go up and down completely randomly.

Pair Corralation between Waterstone Financial and ST Bancorp

Given the investment horizon of 90 days Waterstone Financial is expected to generate 0.86 times more return on investment than ST Bancorp. However, Waterstone Financial is 1.16 times less risky than ST Bancorp. It trades about 0.03 of its potential returns per unit of risk. ST Bancorp is currently generating about 0.02 per unit of risk. If you would invest  1,462  in Waterstone Financial on September 3, 2024 and sell it today you would earn a total of  47.00  from holding Waterstone Financial or generate 3.21% return on investment over 90 days.

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

Waterstone Financial  vs.  ST 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 recent stock price disturbance, may contribute to mid-run losses for the stockholders.

ST Bancorp

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Waterstone Financial and ST Bancorp

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

The idea behind Waterstone Financial and ST 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.