Correlation Between SPACE and Washington Mutual
Can any of the company-specific risk be diversified away by investing in both SPACE and Washington Mutual 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 SPACE and Washington Mutual into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPACE and Washington Mutual Investors, you can compare the effects of market volatilities on SPACE and Washington Mutual 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 SPACE with a short position of Washington Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPACE and Washington Mutual.
Diversification Opportunities for SPACE and Washington Mutual
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SPACE and Washington is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding SPACE and Washington Mutual Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Washington Mutual and SPACE 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 SPACE are associated (or correlated) with Washington Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Washington Mutual has no effect on the direction of SPACE i.e., SPACE and Washington Mutual go up and down completely randomly.
Pair Corralation between SPACE and Washington Mutual
Assuming the 90 days horizon SPACE is expected to generate 7.54 times more return on investment than Washington Mutual. However, SPACE is 7.54 times more volatile than Washington Mutual Investors. It trades about 0.21 of its potential returns per unit of risk. Washington Mutual Investors is currently generating about 0.14 per unit of risk. If you would invest 33.00 in SPACE on September 2, 2024 and sell it today you would earn a total of 26.00 from holding SPACE or generate 78.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 96.97% |
| Values | Daily Returns |
SPACE vs. Washington Mutual Investors
Performance |
| Timeline |
| SPACE |
| Washington Mutual |
SPACE and Washington Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPACE and Washington Mutual
The main advantage of trading using opposite SPACE and Washington Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPACE position performs unexpectedly, Washington Mutual 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 Mutual will offset losses from the drop in Washington Mutual's long position.The idea behind SPACE and Washington Mutual Investors 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.| Washington Mutual vs. Income Fund Of | Washington Mutual vs. New World Fund | Washington Mutual vs. American Mutual Fund | Washington Mutual vs. American Mutual Fund |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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