Correlation Between Washington Mutual and Federated Kaufmann
Can any of the company-specific risk be diversified away by investing in both Washington Mutual and Federated Kaufmann 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 Mutual and Federated Kaufmann into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Washington Mutual Investors and Federated Kaufmann Small, you can compare the effects of market volatilities on Washington Mutual and Federated Kaufmann 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 Mutual with a short position of Federated Kaufmann. Check out your portfolio center. Please also check ongoing floating volatility patterns of Washington Mutual and Federated Kaufmann.
Diversification Opportunities for Washington Mutual and Federated Kaufmann
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Washington and Federated is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Washington Mutual Investors and Federated Kaufmann Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Kaufmann Small and Washington Mutual 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 Mutual Investors are associated (or correlated) with Federated Kaufmann. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Kaufmann Small has no effect on the direction of Washington Mutual i.e., Washington Mutual and Federated Kaufmann go up and down completely randomly.
Pair Corralation between Washington Mutual and Federated Kaufmann
Assuming the 90 days horizon Washington Mutual Investors is expected to generate 0.61 times more return on investment than Federated Kaufmann. However, Washington Mutual Investors is 1.64 times less risky than Federated Kaufmann. It trades about 0.1 of its potential returns per unit of risk. Federated Kaufmann Small is currently generating about 0.05 per unit of risk. If you would invest 4,719 in Washington Mutual Investors on September 4, 2024 and sell it today you would earn a total of 1,876 from holding Washington Mutual Investors or generate 39.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Washington Mutual Investors vs. Federated Kaufmann Small
Performance |
| Timeline |
| Washington Mutual |
| Federated Kaufmann Small |
Washington Mutual and Federated Kaufmann Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Washington Mutual and Federated Kaufmann
The main advantage of trading using opposite Washington Mutual and Federated Kaufmann positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Washington Mutual position performs unexpectedly, Federated Kaufmann 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 Federated Kaufmann will offset losses from the drop in Federated Kaufmann's long position.| Washington Mutual vs. Franklin High Yield | Washington Mutual vs. Limited Term Tax | Washington Mutual vs. Vanguard California Long Term | Washington Mutual vs. Bbh Intermediate Municipal |
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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