Correlation Between WTB Financial and Mountain Pacific

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

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

Diversification Opportunities for WTB Financial and Mountain Pacific

0.64

Correlation Coefficient

WTB Financial  Mountain Pacific

Poor diversification

The 3 months correlation between WTB and Mountain is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding WTB Financial and Mountain Pacific Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mountain Pacific Bancorp and WTB 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 WTB Financial are associated (or correlated) with Mountain Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mountain Pacific Bancorp has no effect on the direction of WTB Financial i.e., WTB Financial and Mountain Pacific go up and down completely randomly.

Pair Corralation between WTB Financial and Mountain Pacific

Assuming the 90 days horizon WTB Financial is expected to generate 3.79 times less return on investment than Mountain Pacific. But when comparing it to its historical volatility, WTB Financial is 1.95 times less risky than Mountain Pacific. It trades about 0.09 of its potential returns per unit of risk. Mountain Pacific Bancorp is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,050  in Mountain Pacific Bancorp on September 4, 2024 and sell it today you would earn a total of  200.00  from holding Mountain Pacific Bancorp or generate 19.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.38%
Values	Daily Returns

WTB Financial  vs.  Mountain Pacific Bancorp

WTB Financial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WTB Financial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, WTB Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Mountain Pacific Bancorp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mountain Pacific Bancorp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Mountain Pacific sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WTB Financial and Mountain Pacific

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

The idea behind WTB Financial and Mountain Pacific 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.