Correlation Between New World and Washington Mutual
Can any of the company-specific risk be diversified away by investing in both New World 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 New World and Washington Mutual into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New World Fund and Washington Mutual Investors, you can compare the effects of market volatilities on New World 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 New World with a short position of Washington Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of New World and Washington Mutual.
Diversification Opportunities for New World and Washington Mutual
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between New and Washington is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding New World 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 New World 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 New World 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 New World i.e., New World and Washington Mutual go up and down completely randomly.
Pair Corralation between New World and Washington Mutual
Assuming the 90 days horizon New World Fund is expected to under-perform the Washington Mutual. But the mutual fund apears to be less risky and, when comparing its historical volatility, New World Fund is 1.11 times less risky than Washington Mutual. The mutual fund trades about -0.19 of its potential returns per unit of risk. The Washington Mutual Investors is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 6,416 in Washington Mutual Investors on August 28, 2024 and sell it today you would earn a total of 87.00 from holding Washington Mutual Investors or generate 1.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
New World Fund vs. Washington Mutual Investors
Performance |
| Timeline |
| New World Fund |
| Washington Mutual |
New World and Washington Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New World and Washington Mutual
The main advantage of trading using opposite New World and Washington Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New World 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.| New World vs. Smallcap World Fund | New World vs. Investment Of America | New World vs. Europacific Growth Fund | New World vs. Capital World Growth |
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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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