Correlation Between Washington Federal and Independent Bank
Can any of the company-specific risk be diversified away by investing in both Washington Federal and Independent Bank 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 Independent Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Washington Federal and Independent Bank, you can compare the effects of market volatilities on Washington Federal and Independent Bank 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 Independent Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Washington Federal and Independent Bank.
Diversification Opportunities for Washington Federal and Independent Bank
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Washington and Independent is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Washington Federal and Independent Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Independent Bank 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 Independent Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Independent Bank has no effect on the direction of Washington Federal i.e., Washington Federal and Independent Bank go up and down completely randomly.
Pair Corralation between Washington Federal and Independent Bank
Given the investment horizon of 90 days Washington Federal is expected to under-perform the Independent Bank. In addition to that, Washington Federal is 1.17 times more volatile than Independent Bank. It trades about -0.26 of its total potential returns per unit of risk. Independent Bank is currently generating about -0.05 per unit of volatility. If you would invest 3,780 in Independent Bank on November 2, 2024 and sell it today you would lose (140.00) from holding Independent Bank or give up 3.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Washington Federal vs. Independent Bank
Performance |
| Timeline |
| Washington Federal |
| Independent Bank |
Washington Federal and Independent Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Washington Federal and Independent Bank
The main advantage of trading using opposite Washington Federal and Independent Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Washington Federal position performs unexpectedly, Independent Bank 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 Independent Bank will offset losses from the drop in Independent Bank's long position.| Washington Federal vs. Finward Bancorp | Washington Federal vs. Great Southern Bancorp | Washington Federal vs. First Mid Illinois | Washington Federal vs. Franklin Financial Services |
| Independent Bank vs. First Northwest Bancorp | Independent Bank vs. Community West Bancshares | Independent Bank vs. First Financial Northwest | Independent Bank vs. Great Southern 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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