Correlation Between Washington Mutual and American Funds
Can any of the company-specific risk be diversified away by investing in both Washington Mutual and American Funds 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 American Funds 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 American Funds New, you can compare the effects of market volatilities on Washington Mutual and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Washington Mutual and American Funds.
Diversification Opportunities for Washington Mutual and American Funds
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Washington and American is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Washington Mutual Investors and American Funds New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds New 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds New has no effect on the direction of Washington Mutual i.e., Washington Mutual and American Funds go up and down completely randomly.
Pair Corralation between Washington Mutual and American Funds
Assuming the 90 days horizon Washington Mutual Investors is expected to generate 1.13 times more return on investment than American Funds. However, Washington Mutual is 1.13 times more volatile than American Funds New. It trades about 0.27 of its potential returns per unit of risk. American Funds New is currently generating about 0.18 per unit of risk. If you would invest 6,367 in Washington Mutual Investors on September 1, 2024 and sell it today you would earn a total of 250.00 from holding Washington Mutual Investors or generate 3.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Washington Mutual Investors vs. American Funds New
Performance |
| Timeline |
| Washington Mutual |
| American Funds New |
Washington Mutual and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Washington Mutual and American Funds
The main advantage of trading using opposite Washington Mutual and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Washington Mutual position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.| Washington Mutual vs. Income Fund Of | Washington Mutual vs. New World Fund | Washington Mutual vs. American Mutual Fund | Washington Mutual vs. American Mutual Fund |
| American Funds vs. Ishares Municipal Bond | American Funds vs. Nuveen Minnesota Municipal | American Funds vs. Federated Ohio Municipal | American Funds vs. Nuveen Arizona Municipal |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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