Correlation Between Washington Federal and US Bancorp
Can any of the company-specific risk be diversified away by investing in both Washington Federal and US Bancorp 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 US Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Washington Federal and US Bancorp, you can compare the effects of market volatilities on Washington Federal and US Bancorp 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 US Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Washington Federal and US Bancorp.
Diversification Opportunities for Washington Federal and US Bancorp
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Washington and USB-PP is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Washington Federal and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp 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 US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of Washington Federal i.e., Washington Federal and US Bancorp go up and down completely randomly.
Pair Corralation between Washington Federal and US Bancorp
Assuming the 90 days horizon Washington Federal is expected to under-perform the US Bancorp. In addition to that, Washington Federal is 1.59 times more volatile than US Bancorp. It trades about -0.08 of its total potential returns per unit of risk. US Bancorp is currently generating about -0.05 per unit of volatility. If you would invest 2,440 in US Bancorp on October 25, 2024 and sell it today you would lose (64.00) from holding US Bancorp or give up 2.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.33% |
| Values | Daily Returns |
Washington Federal vs. US Bancorp
Performance |
| Timeline |
| Washington Federal |
| US Bancorp |
Washington Federal and US Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Washington Federal and US Bancorp
The main advantage of trading using opposite Washington Federal and US Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Washington Federal position performs unexpectedly, US Bancorp 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 US Bancorp will offset losses from the drop in US Bancorp's long position.| Washington Federal vs. Fulton Financial | Washington Federal vs. Texas Capital Bancshares | Washington Federal vs. Huntington Bancshares Incorporated | Washington Federal vs. Wintrust Financial Corp |
| US Bancorp vs. Texas Capital Bancshares | US Bancorp vs. Washington Federal | US Bancorp vs. First Guaranty Bancshares | US Bancorp vs. Aquagold International |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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