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
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Washington and USB-PR is 0.85. 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. But the preferred stock apears to be less risky and, when comparing its historical volatility, Washington Federal is 1.09 times less risky than US Bancorp. The preferred stock trades about -0.28 of its potential returns per unit of risk. The US Bancorp is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest 1,919 in US Bancorp on August 24, 2024 and sell it today you would lose (94.00) from holding US Bancorp or give up 4.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| 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. Capital One Financial | Washington Federal vs. Capital One Financial | Washington Federal vs. Bank of America | Washington Federal vs. KeyCorp |
| US Bancorp vs. US Bancorp | US Bancorp vs. Bank of America | US Bancorp vs. US Bancorp | US Bancorp vs. Wells Fargo |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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