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
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Washington and New is 0.91. 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 Investors is expected to generate 0.24 times more return on investment than New Economy. However, Washington Mutual Investors is 4.2 times less risky than New Economy. It trades about 0.27 of its potential returns per unit of risk. New Economy Fund is currently generating about -0.06 per unit of risk. If you would invest 6,457 in Washington Mutual Investors on September 18, 2024 and sell it today you would earn a total of 181.00 from holding Washington Mutual Investors or generate 2.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.24% |
| 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. Pace Smallmedium Growth | Washington Mutual vs. Franklin Growth Opportunities | Washington Mutual vs. Praxis Growth Index | Washington Mutual vs. T Rowe Price |
| New Economy vs. Small Pany Growth | New Economy vs. T Rowe Price | New Economy vs. Praxis Growth Index | New Economy vs. T Rowe Price |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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