Correlation Between US Bancorp and Washington Federal
Can any of the company-specific risk be diversified away by investing in both US Bancorp 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 US Bancorp and Washington Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Bancorp and Washington Federal, you can compare the effects of market volatilities on US Bancorp 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 US Bancorp with a short position of Washington Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Bancorp and Washington Federal.
Diversification Opportunities for US Bancorp and Washington Federal
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between USB-PH and Washington is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding US Bancorp and Washington Federal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Washington Federal and US Bancorp 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 US Bancorp 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 US Bancorp i.e., US Bancorp and Washington Federal go up and down completely randomly.
Pair Corralation between US Bancorp and Washington Federal
Assuming the 90 days trading horizon US Bancorp is expected to generate 0.52 times more return on investment than Washington Federal. However, US Bancorp is 1.94 times less risky than Washington Federal. It trades about 0.16 of its potential returns per unit of risk. Washington Federal is currently generating about 0.06 per unit of risk. If you would invest 1,568 in US Bancorp on September 1, 2024 and sell it today you would earn a total of 740.00 from holding US Bancorp or generate 47.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
US Bancorp vs. Washington Federal
Performance |
| Timeline |
| US Bancorp |
| Washington Federal |
US Bancorp and Washington Federal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Bancorp and Washington Federal
The main advantage of trading using opposite US Bancorp and Washington Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Bancorp 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.| US Bancorp vs. US Bancorp PERP | US Bancorp vs. KeyCorp | US Bancorp vs. KeyCorp | US Bancorp vs. Regions Financial |
| Washington Federal vs. KeyCorp | Washington Federal vs. KeyCorp | Washington Federal vs. Fifth Third Bancorp | Washington Federal vs. Citizens Financial Group |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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