Correlation Between Inflation Protected and Washington Mutual
Can any of the company-specific risk be diversified away by investing in both Inflation Protected 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 Inflation Protected and Washington Mutual into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Inflation Protected Bond Fund and Washington Mutual Investors, you can compare the effects of market volatilities on Inflation Protected 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 Inflation Protected with a short position of Washington Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inflation Protected and Washington Mutual.
Diversification Opportunities for Inflation Protected and Washington Mutual
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Inflation and Washington is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Inflation Protected Bond Fund and Washington Mutual Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Washington Mutual and Inflation Protected 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 Inflation Protected Bond Fund 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 Inflation Protected i.e., Inflation Protected and Washington Mutual go up and down completely randomly.
Pair Corralation between Inflation Protected and Washington Mutual
Assuming the 90 days horizon Inflation Protected is expected to generate 2.0 times less return on investment than Washington Mutual. But when comparing it to its historical volatility, Inflation Protected Bond Fund is 2.43 times less risky than Washington Mutual. It trades about 0.07 of its potential returns per unit of risk. Washington Mutual Investors is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 5,007 in Washington Mutual Investors on September 12, 2024 and sell it today you would earn a total of 1,504 from holding Washington Mutual Investors or generate 30.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Inflation Protected Bond Fund vs. Washington Mutual Investors
Performance |
| Timeline |
| Inflation Protected |
| Washington Mutual |
Inflation Protected and Washington Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inflation Protected and Washington Mutual
The main advantage of trading using opposite Inflation Protected and Washington Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inflation Protected 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.| Inflation Protected vs. Aqr Large Cap | Inflation Protected vs. Pace Large Growth | Inflation Protected vs. Old Westbury Large | Inflation Protected vs. Rational Strategic Allocation |
| Washington Mutual vs. Schwab Small Cap Index | Washington Mutual vs. Schwab Total Stock | Washington Mutual vs. Schwab International Index | Washington Mutual vs. Schwab Sp 500 |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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