Correlation Between Washington Mutual and Ceconomy
Can any of the company-specific risk be diversified away by investing in both Washington Mutual and Ceconomy 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 Washington Mutual and Ceconomy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Washington Mutual Investors and Ceconomy AG ADR, you can compare the effects of market volatilities on Washington Mutual and Ceconomy 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 Washington Mutual with a short position of Ceconomy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Washington Mutual and Ceconomy.
Diversification Opportunities for Washington Mutual and Ceconomy
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Washington and Ceconomy is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Washington Mutual Investors and Ceconomy AG ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ceconomy AG ADR and Washington Mutual 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 Washington Mutual Investors are associated (or correlated) with Ceconomy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ceconomy AG ADR has no effect on the direction of Washington Mutual i.e., Washington Mutual and Ceconomy go up and down completely randomly.
Pair Corralation between Washington Mutual and Ceconomy
Assuming the 90 days horizon Washington Mutual is expected to generate 1.38 times less return on investment than Ceconomy. But when comparing it to its historical volatility, Washington Mutual Investors is 6.15 times less risky than Ceconomy. It trades about 0.21 of its potential returns per unit of risk. Ceconomy AG ADR is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 47.00 in Ceconomy AG ADR on October 24, 2024 and sell it today you would earn a total of 1.00 from holding Ceconomy AG ADR or generate 2.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Washington Mutual Investors vs. Ceconomy AG ADR
Performance |
| Timeline |
| Washington Mutual |
| Ceconomy AG ADR |
Washington Mutual and Ceconomy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Washington Mutual and Ceconomy
The main advantage of trading using opposite Washington Mutual and Ceconomy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Washington Mutual position performs unexpectedly, Ceconomy 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 Ceconomy will offset losses from the drop in Ceconomy's long position.| Washington Mutual vs. Alphacentric Symmetry Strategy | Washington Mutual vs. Barings Emerging Markets | Washington Mutual vs. Western Assets Emerging | Washington Mutual vs. Catalystmillburn Hedge Strategy |
| Ceconomy vs. Green River Gold | Ceconomy vs. Dixons Carphone plc | Ceconomy vs. Tandy Leather Factory | Ceconomy vs. Card Factory plc |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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