Correlation Between Washington Mutual and New Economy
Can any of the company-specific risk be diversified away by investing in both Washington Mutual and New Economy 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 New Economy 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 New Economy Fund, you can compare the effects of market volatilities on Washington Mutual and New Economy 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 New Economy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Washington Mutual and New Economy.
Diversification Opportunities for Washington Mutual and New Economy
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Washington and New is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Washington Mutual Investors and New Economy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Economy Fund 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 New Economy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Economy Fund has no effect on the direction of Washington Mutual i.e., Washington Mutual and New Economy go up and down completely randomly.
Pair Corralation between Washington Mutual and New Economy
Assuming the 90 days horizon Washington Mutual is expected to generate 1.03 times less return on investment than New Economy. But when comparing it to its historical volatility, Washington Mutual Investors is 1.47 times less risky than New Economy. It trades about 0.14 of its potential returns per unit of risk. New Economy Fund is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 5,984 in New Economy Fund on August 30, 2024 and sell it today you would earn a total of 764.00 from holding New Economy Fund or generate 12.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Washington Mutual Investors vs. New Economy Fund
Performance |
| Timeline |
| Washington Mutual |
| New Economy Fund |
Washington Mutual and New Economy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Washington Mutual and New Economy
The main advantage of trading using opposite Washington Mutual and New Economy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Washington Mutual position performs unexpectedly, New Economy 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 New Economy will offset losses from the drop in New Economy's long position.| Washington Mutual vs. Hennessy Large Cap | Washington Mutual vs. Fidelity Advisor Financial | Washington Mutual vs. Financial Industries Fund | Washington Mutual vs. Goldman Sachs Trust |
| New Economy vs. Income Fund Of | New Economy vs. New World Fund | New Economy vs. American Mutual Fund | New Economy 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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