Correlation Between Washington Federal and First Foundation
Can any of the company-specific risk be diversified away by investing in both Washington Federal and First Foundation 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 First Foundation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Washington Federal and First Foundation, you can compare the effects of market volatilities on Washington Federal and First Foundation 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 First Foundation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Washington Federal and First Foundation.
Diversification Opportunities for Washington Federal and First Foundation
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Washington and First is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Washington Federal and First Foundation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Foundation 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 First Foundation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Foundation has no effect on the direction of Washington Federal i.e., Washington Federal and First Foundation go up and down completely randomly.
Pair Corralation between Washington Federal and First Foundation
Assuming the 90 days horizon Washington Federal is expected to under-perform the First Foundation. But the preferred stock apears to be less risky and, when comparing its historical volatility, Washington Federal is 3.07 times less risky than First Foundation. The preferred stock trades about -0.05 of its potential returns per unit of risk. The First Foundation is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 673.00 in First Foundation on September 1, 2024 and sell it today you would earn a total of 122.00 from holding First Foundation or generate 18.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Washington Federal vs. First Foundation
Performance |
| Timeline |
| Washington Federal |
| First Foundation |
Washington Federal and First Foundation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Washington Federal and First Foundation
The main advantage of trading using opposite Washington Federal and First Foundation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Washington Federal position performs unexpectedly, First Foundation 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 First Foundation will offset losses from the drop in First Foundation's long position.| Washington Federal vs. KeyCorp | Washington Federal vs. KeyCorp | Washington Federal vs. Fifth Third Bancorp | Washington Federal vs. Citizens Financial Group |
| First Foundation vs. Veritex Holdings | First Foundation vs. ConnectOne Bancorp | First Foundation vs. The First Bancshares, | First Foundation vs. First Mid Illinois |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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