Correlation Between Washington Mutual and Value Line
Can any of the company-specific risk be diversified away by investing in both Washington Mutual and Value Line 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 Value Line 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 Value Line Larger, you can compare the effects of market volatilities on Washington Mutual and Value Line 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 Value Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of Washington Mutual and Value Line.
Diversification Opportunities for Washington Mutual and Value Line
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Washington and Value is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Washington Mutual Investors and Value Line Larger in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Line Larger 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 Value Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Line Larger has no effect on the direction of Washington Mutual i.e., Washington Mutual and Value Line go up and down completely randomly.
Pair Corralation between Washington Mutual and Value Line
Assuming the 90 days horizon Washington Mutual is expected to generate 1.72 times less return on investment than Value Line. But when comparing it to its historical volatility, Washington Mutual Investors is 2.01 times less risky than Value Line. It trades about 0.1 of its potential returns per unit of risk. Value Line Larger is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,209 in Value Line Larger on September 2, 2024 and sell it today you would earn a total of 1,647 from holding Value Line Larger or generate 74.56% 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. Value Line Larger
Performance |
| Timeline |
| Washington Mutual |
| Value Line Larger |
Washington Mutual and Value Line Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Washington Mutual and Value Line
The main advantage of trading using opposite Washington Mutual and Value Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Washington Mutual position performs unexpectedly, Value Line 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 Value Line will offset losses from the drop in Value Line's 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 |
| Value Line vs. Value Line Mid | Value Line vs. Value Line Premier | Value Line vs. Value Line Income | Value Line vs. Value Line Asset |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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