Correlation Between Texas Capital and Washington Federal
Can any of the company-specific risk be diversified away by investing in both Texas Capital and Washington Federal 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 Texas Capital and Washington Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Texas Capital Bancshares and Washington Federal, you can compare the effects of market volatilities on Texas Capital and Washington Federal 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 Texas Capital with a short position of Washington Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Texas Capital and Washington Federal.
Diversification Opportunities for Texas Capital and Washington Federal
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Texas and Washington is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Texas Capital Bancshares and Washington Federal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Washington Federal and Texas Capital 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 Texas Capital Bancshares are associated (or correlated) with Washington Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Washington Federal has no effect on the direction of Texas Capital i.e., Texas Capital and Washington Federal go up and down completely randomly.
Pair Corralation between Texas Capital and Washington Federal
Assuming the 90 days horizon Texas Capital is expected to generate 1.36 times less return on investment than Washington Federal. But when comparing it to its historical volatility, Texas Capital Bancshares is 1.02 times less risky than Washington Federal. It trades about 0.07 of its potential returns per unit of risk. Washington Federal is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,296 in Washington Federal on August 24, 2024 and sell it today you would earn a total of 449.00 from holding Washington Federal or generate 34.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Texas Capital Bancshares vs. Washington Federal
Performance |
| Timeline |
| Texas Capital Bancshares |
| Washington Federal |
Texas Capital and Washington Federal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Texas Capital and Washington Federal
The main advantage of trading using opposite Texas Capital and Washington Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Texas Capital position performs unexpectedly, Washington Federal 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 Washington Federal will offset losses from the drop in Washington Federal's long position.| Texas Capital vs. Washington Federal | Texas Capital vs. First Citizens BancShares | Texas Capital vs. Dime Community Bancshares | Texas Capital vs. Pinnacle Financial Partners |
| Washington Federal vs. Capital One Financial | Washington Federal vs. Capital One Financial | Washington Federal vs. Bank of America | Washington Federal vs. KeyCorp |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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