Correlation Between Washington Mutual and New World
Can any of the company-specific risk be diversified away by investing in both Washington Mutual and New World 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 New World 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 New World Fund, you can compare the effects of market volatilities on Washington Mutual and New World 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 New World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Washington Mutual and New World.
Diversification Opportunities for Washington Mutual and New World
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Washington and New is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Washington Mutual Investors and New World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New World Fund 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 New World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New World Fund has no effect on the direction of Washington Mutual i.e., Washington Mutual and New World go up and down completely randomly.
Pair Corralation between Washington Mutual and New World
Assuming the 90 days horizon Washington Mutual Investors is expected to generate 0.96 times more return on investment than New World. However, Washington Mutual Investors is 1.04 times less risky than New World. It trades about 0.1 of its potential returns per unit of risk. New World Fund is currently generating about 0.06 per unit of risk. If you would invest 4,641 in Washington Mutual Investors on August 30, 2024 and sell it today you would earn a total of 1,931 from holding Washington Mutual Investors or generate 41.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Washington Mutual Investors vs. New World Fund
Performance |
| Timeline |
| Washington Mutual |
| New World Fund |
Washington Mutual and New World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Washington Mutual and New World
The main advantage of trading using opposite Washington Mutual and New World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Washington Mutual position performs unexpectedly, New World 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 New World will offset losses from the drop in New World's long position.| Washington Mutual vs. Ambrus Core Bond | Washington Mutual vs. Multisector Bond Sma | Washington Mutual vs. T Rowe Price | Washington Mutual vs. Artisan High Income |
| New World vs. Huber Capital Diversified | New World vs. Vanguard Strategic Small Cap | New World vs. The Gabelli Small | New World vs. Jhancock Diversified Macro |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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