Correlation Between Washington Mutual and American Funds
Can any of the company-specific risk be diversified away by investing in both Washington Mutual and American Funds 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 American Funds 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 American Funds Growth, you can compare the effects of market volatilities on Washington Mutual and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Washington Mutual and American Funds.
Diversification Opportunities for Washington Mutual and American Funds
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Washington and American is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Washington Mutual Investors and American Funds Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Growth 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Growth has no effect on the direction of Washington Mutual i.e., Washington Mutual and American Funds go up and down completely randomly.
Pair Corralation between Washington Mutual and American Funds
Assuming the 90 days horizon Washington Mutual is expected to generate 1.42 times less return on investment than American Funds. But when comparing it to its historical volatility, Washington Mutual Investors is 1.2 times less risky than American Funds. It trades about 0.09 of its potential returns per unit of risk. American Funds Growth is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,284 in American Funds Growth on August 29, 2024 and sell it today you would earn a total of 469.00 from holding American Funds Growth or generate 20.53% 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. American Funds Growth
Performance |
| Timeline |
| Washington Mutual |
| American Funds Growth |
Washington Mutual and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Washington Mutual and American Funds
The main advantage of trading using opposite Washington Mutual and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Washington Mutual position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.| Washington Mutual vs. Vanguard Total Stock | Washington Mutual vs. Vanguard 500 Index | Washington Mutual vs. Vanguard Total Stock | Washington Mutual vs. Vanguard Total Stock |
| American Funds vs. Pace Large Growth | American Funds vs. Vanguard Equity Income | American Funds vs. Strategic Allocation Aggressive | American Funds vs. Aqr Large Cap |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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