Correlation Between Washington Federal and National Bankshares
Can any of the company-specific risk be diversified away by investing in both Washington Federal and National Bankshares 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 National Bankshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Washington Federal and National Bankshares, you can compare the effects of market volatilities on Washington Federal and National Bankshares 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 National Bankshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Washington Federal and National Bankshares.
Diversification Opportunities for Washington Federal and National Bankshares
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Washington and National is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Washington Federal and National Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bankshares 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 National Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bankshares has no effect on the direction of Washington Federal i.e., Washington Federal and National Bankshares go up and down completely randomly.
Pair Corralation between Washington Federal and National Bankshares
Given the investment horizon of 90 days Washington Federal is expected to generate 0.79 times more return on investment than National Bankshares. However, Washington Federal is 1.27 times less risky than National Bankshares. It trades about 0.04 of its potential returns per unit of risk. National Bankshares is currently generating about 0.03 per unit of risk. If you would invest 2,798 in Washington Federal on August 31, 2024 and sell it today you would earn a total of 860.00 from holding Washington Federal or generate 30.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.73% |
| Values | Daily Returns |
Washington Federal vs. National Bankshares
Performance |
| Timeline |
| Washington Federal |
| National Bankshares |
Washington Federal and National Bankshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Washington Federal and National Bankshares
The main advantage of trading using opposite Washington Federal and National Bankshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Washington Federal position performs unexpectedly, National Bankshares 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 National Bankshares will offset losses from the drop in National Bankshares' 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 |
| National Bankshares vs. KeyCorp | National Bankshares vs. Comerica | National Bankshares vs. First Horizon National | National Bankshares vs. Western Alliance Bancorporation |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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