Correlation Between Washington Mutual and M Large
Can any of the company-specific risk be diversified away by investing in both Washington Mutual and M Large 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 M Large 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 M Large Cap, you can compare the effects of market volatilities on Washington Mutual and M Large 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 M Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Washington Mutual and M Large.
Diversification Opportunities for Washington Mutual and M Large
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Washington and MTCGX is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Washington Mutual Investors and M Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M Large Cap 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 M Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M Large Cap has no effect on the direction of Washington Mutual i.e., Washington Mutual and M Large go up and down completely randomly.
Pair Corralation between Washington Mutual and M Large
Assuming the 90 days horizon Washington Mutual is expected to generate 12.3 times less return on investment than M Large. But when comparing it to its historical volatility, Washington Mutual Investors is 2.1 times less risky than M Large. It trades about 0.01 of its potential returns per unit of risk. M Large Cap is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 3,705 in M Large Cap on September 15, 2024 and sell it today you would earn a total of 28.00 from holding M Large Cap or generate 0.76% 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. M Large Cap
Performance |
| Timeline |
| Washington Mutual |
| M Large Cap |
Washington Mutual and M Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Washington Mutual and M Large
The main advantage of trading using opposite Washington Mutual and M Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Washington Mutual position performs unexpectedly, M Large 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 M Large will offset losses from the drop in M Large'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 |
| M Large vs. Washington Mutual Investors | M Large vs. Morningstar Unconstrained Allocation | M Large vs. T Rowe Price | M Large vs. Old Westbury Large |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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