Correlation Between Washington Federal and Arrow Financial
Can any of the company-specific risk be diversified away by investing in both Washington Federal and Arrow Financial 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 Federal and Arrow Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Washington Federal and Arrow Financial, you can compare the effects of market volatilities on Washington Federal and Arrow Financial 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 Federal with a short position of Arrow Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Washington Federal and Arrow Financial.
Diversification Opportunities for Washington Federal and Arrow Financial
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Washington and Arrow is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Washington Federal and Arrow Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Financial and Washington Federal 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 Federal are associated (or correlated) with Arrow Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Financial has no effect on the direction of Washington Federal i.e., Washington Federal and Arrow Financial go up and down completely randomly.
Pair Corralation between Washington Federal and Arrow Financial
Given the investment horizon of 90 days Washington Federal is expected to generate 216.29 times less return on investment than Arrow Financial. But when comparing it to its historical volatility, Washington Federal is 1.12 times less risky than Arrow Financial. It trades about 0.0 of its potential returns per unit of risk. Arrow Financial is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,025 in Arrow Financial on August 23, 2024 and sell it today you would earn a total of 245.00 from holding Arrow Financial or generate 8.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Washington Federal vs. Arrow Financial
Performance |
| Timeline |
| Washington Federal |
| Arrow Financial |
Washington Federal and Arrow Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Washington Federal and Arrow Financial
The main advantage of trading using opposite Washington Federal and Arrow Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Washington Federal position performs unexpectedly, Arrow Financial 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 Arrow Financial will offset losses from the drop in Arrow Financial's long position.| Washington Federal vs. Waterstone Financial | Washington Federal vs. Mid Penn Bancorp | Washington Federal vs. ST Bancorp | Washington Federal vs. Republic Bancorp |
| Arrow Financial vs. Waterstone Financial | Arrow Financial vs. Mid Penn Bancorp | Arrow Financial vs. ST Bancorp | Arrow Financial vs. Republic Bancorp |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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