Correlation Between Washington Mutual and Capital World
Can any of the company-specific risk be diversified away by investing in both Washington Mutual and Capital World 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 Capital World 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 Capital World Growth, you can compare the effects of market volatilities on Washington Mutual and Capital World 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 Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Washington Mutual and Capital World.
Diversification Opportunities for Washington Mutual and Capital World
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Washington and Capital is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Washington Mutual Investors and Capital World Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Growth 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 Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Growth has no effect on the direction of Washington Mutual i.e., Washington Mutual and Capital World go up and down completely randomly.
Pair Corralation between Washington Mutual and Capital World
Assuming the 90 days horizon Washington Mutual Investors is expected to generate 0.91 times more return on investment than Capital World. However, Washington Mutual Investors is 1.1 times less risky than Capital World. It trades about 0.15 of its potential returns per unit of risk. Capital World Growth is currently generating about 0.11 per unit of risk. If you would invest 5,153 in Washington Mutual Investors on August 31, 2024 and sell it today you would earn a total of 1,433 from holding Washington Mutual Investors or generate 27.81% 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. Capital World Growth
Performance |
| Timeline |
| Washington Mutual |
| Capital World Growth |
Washington Mutual and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Washington Mutual and Capital World
The main advantage of trading using opposite Washington Mutual and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Washington Mutual position performs unexpectedly, Capital World 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 Capital World will offset losses from the drop in Capital World's long position.| Washington Mutual vs. Aquagold International | Washington Mutual vs. Morningstar Unconstrained Allocation | Washington Mutual vs. Thrivent High Yield | Washington Mutual vs. Via Renewables |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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