Correlation Between Brown Brown and Westamerica Bancorporation

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

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

Diversification Opportunities for Brown Brown and Westamerica Bancorporation

0.04

Correlation Coefficient

Brown Brown  Westamerica Bancorporation

Significant diversification

The 3 months correlation between Brown and Westamerica is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Brown Brown and Westamerica Bancorp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westamerica Bancorporation and Brown Brown 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 Brown Brown are associated (or correlated) with Westamerica Bancorporation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westamerica Bancorporation has no effect on the direction of Brown Brown i.e., Brown Brown and Westamerica Bancorporation go up and down completely randomly.

Pair Corralation between Brown Brown and Westamerica Bancorporation

Considering the 90-day investment horizon Brown Brown is expected to under-perform the Westamerica Bancorporation. In addition to that, Brown Brown is 1.27 times more volatile than Westamerica Bancorporation. It trades about -0.18 of its total potential returns per unit of risk. Westamerica Bancorporation is currently generating about -0.03 per unit of volatility. If you would invest  4,947  in Westamerica Bancorporation on May 8, 2025 and sell it today you would lose (160.00) from holding Westamerica Bancorporation or give up 3.23% of portfolio value over 90 days.

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

Brown Brown  vs.  Westamerica Bancorp.

Brown Brown

Risk-Adjusted Performance

Weakest

Over the last 90 days Brown Brown has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in September 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Westamerica Bancorporation

Risk-Adjusted Performance

Weakest

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

Pair Trading with Brown Brown and Westamerica Bancorporation

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

The idea behind Brown Brown and Westamerica Bancorporation 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.