Correlation Between Washington Federal and Texas Capital
Can any of the company-specific risk be diversified away by investing in both Washington Federal and Texas Capital 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 Texas Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Washington Federal and Texas Capital Bancshares, you can compare the effects of market volatilities on Washington Federal and Texas Capital 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 Texas Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Washington Federal and Texas Capital.
Diversification Opportunities for Washington Federal and Texas Capital
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Washington and Texas is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Washington Federal and Texas Capital Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Capital Bancshares 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 Texas Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texas Capital Bancshares has no effect on the direction of Washington Federal i.e., Washington Federal and Texas Capital go up and down completely randomly.
Pair Corralation between Washington Federal and Texas Capital
Assuming the 90 days horizon Washington Federal is expected to generate 1.11 times less return on investment than Texas Capital. In addition to that, Washington Federal is 1.06 times more volatile than Texas Capital Bancshares. It trades about 0.05 of its total potential returns per unit of risk. Texas Capital Bancshares is currently generating about 0.06 per unit of volatility. If you would invest 2,043 in Texas Capital Bancshares on August 28, 2024 and sell it today you would earn a total of 84.00 from holding Texas Capital Bancshares or generate 4.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Washington Federal vs. Texas Capital Bancshares
Performance |
| Timeline |
| Washington Federal |
| Texas Capital Bancshares |
Washington Federal and Texas Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Washington Federal and Texas Capital
The main advantage of trading using opposite Washington Federal and Texas Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Washington Federal position performs unexpectedly, Texas Capital 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 Texas Capital will offset losses from the drop in Texas Capital's long position.| Washington Federal vs. Capital One Financial | Washington Federal vs. Capital One Financial | Washington Federal vs. Bank of America |
| Texas Capital vs. Capital One Financial | Texas Capital vs. Capital One Financial | Texas Capital vs. Bank of America |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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