Correlation Between Washington Mutual and Investment
Can any of the company-specific risk be diversified away by investing in both Washington Mutual and Investment 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 Investment 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 Investment Of America, you can compare the effects of market volatilities on Washington Mutual and Investment 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 Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Washington Mutual and Investment.
Diversification Opportunities for Washington Mutual and Investment
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Washington and Investment is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Washington Mutual Investors and Investment Of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment Of America 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 Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment Of America has no effect on the direction of Washington Mutual i.e., Washington Mutual and Investment go up and down completely randomly.
Pair Corralation between Washington Mutual and Investment
Assuming the 90 days horizon Washington Mutual is expected to generate 1.0 times less return on investment than Investment. But when comparing it to its historical volatility, Washington Mutual Investors is 1.03 times less risky than Investment. It trades about 0.19 of its potential returns per unit of risk. Investment Of America is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 5,718 in Investment Of America on October 20, 2024 and sell it today you would earn a total of 156.00 from holding Investment Of America or generate 2.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Washington Mutual Investors vs. Investment Of America
Performance |
| Timeline |
| Washington Mutual |
| Investment Of America |
Washington Mutual and Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Washington Mutual and Investment
The main advantage of trading using opposite Washington Mutual and Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Washington Mutual position performs unexpectedly, Investment 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 Investment will offset losses from the drop in Investment's long position.| Washington Mutual vs. Growth Fund Of | Washington Mutual vs. Europacific Growth Fund | Washington Mutual vs. Smallcap World Fund | Washington Mutual vs. Investment Of America |
| Investment vs. New World Fund | Investment vs. Washington Mutual Investors | Investment vs. Smallcap World Fund | Investment vs. Capital World Growth |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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