Correlation Between Fifth Third and Washington Federal
Can any of the company-specific risk be diversified away by investing in both Fifth Third and Washington Federal 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 Fifth Third and Washington Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fifth Third Bancorp and Washington Federal, you can compare the effects of market volatilities on Fifth Third and Washington Federal 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 Fifth Third with a short position of Washington Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fifth Third and Washington Federal.
Diversification Opportunities for Fifth Third and Washington Federal
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fifth and Washington is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Fifth Third Bancorp and Washington Federal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Washington Federal and Fifth Third 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 Fifth Third Bancorp are associated (or correlated) with Washington Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Washington Federal has no effect on the direction of Fifth Third i.e., Fifth Third and Washington Federal go up and down completely randomly.
Pair Corralation between Fifth Third and Washington Federal
Given the investment horizon of 90 days Fifth Third Bancorp is expected to generate 0.86 times more return on investment than Washington Federal. However, Fifth Third Bancorp is 1.17 times less risky than Washington Federal. It trades about 0.1 of its potential returns per unit of risk. Washington Federal is currently generating about 0.04 per unit of risk. If you would invest 2,527 in Fifth Third Bancorp on August 31, 2024 and sell it today you would earn a total of 2,279 from holding Fifth Third Bancorp or generate 90.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fifth Third Bancorp vs. Washington Federal
Performance |
| Timeline |
| Fifth Third Bancorp |
| Washington Federal |
Fifth Third and Washington Federal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fifth Third and Washington Federal
The main advantage of trading using opposite Fifth Third and Washington Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fifth Third position performs unexpectedly, Washington Federal 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 Washington Federal will offset losses from the drop in Washington Federal's long position.| Fifth Third vs. KeyCorp | Fifth Third vs. Regions Financial | Fifth Third vs. Zions Bancorporation | Fifth Third vs. Huntington Bancshares Incorporated |
| Washington Federal vs. Finward Bancorp | Washington Federal vs. Great Southern Bancorp | Washington Federal vs. First Mid Illinois | Washington Federal vs. Franklin Financial Services |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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