Correlation Between Security National and Waterstone Financial

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

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

Diversification Opportunities for Security National and Waterstone Financial

0.81

Correlation Coefficient

Security National  Waterstone Financial

Very poor diversification

The 3 months correlation between Security and Waterstone is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Security National Financial and Waterstone Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waterstone Financial and Security National 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 Security National Financial are associated (or correlated) with Waterstone Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waterstone Financial has no effect on the direction of Security National i.e., Security National and Waterstone Financial go up and down completely randomly.

Pair Corralation between Security National and Waterstone Financial

Assuming the 90 days horizon Security National Financial is expected to generate 1.18 times more return on investment than Waterstone Financial. However, Security National is 1.18 times more volatile than Waterstone Financial. It trades about -0.01 of its potential returns per unit of risk. Waterstone Financial is currently generating about -0.06 per unit of risk. If you would invest  979.00  in Security National Financial on January 16, 2025 and sell it today you would lose (55.00) from holding Security National Financial or give up 5.62% of portfolio value over 90 days.

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

Security National Financial  vs.  Waterstone Financial

Security National

Risk-Adjusted Performance

Very Weak

Over the last 90 days Security National Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in May 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Waterstone Financial

Risk-Adjusted Performance

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.

Pair Trading with Security National and Waterstone Financial

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

The idea behind Security National Financial and Waterstone Financial 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.