Correlation Between Washington Mutual and Tax-managed
Can any of the company-specific risk be diversified away by investing in both Washington Mutual and Tax-managed 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 Tax-managed 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 Tax Managed Large Cap, you can compare the effects of market volatilities on Washington Mutual and Tax-managed 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 Tax-managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Washington Mutual and Tax-managed.
Diversification Opportunities for Washington Mutual and Tax-managed
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between WASHINGTON and Tax-managed is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Washington Mutual Investors and Tax Managed Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tax Managed Large 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 Tax-managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tax Managed Large has no effect on the direction of Washington Mutual i.e., Washington Mutual and Tax-managed go up and down completely randomly.
Pair Corralation between Washington Mutual and Tax-managed
Assuming the 90 days horizon Washington Mutual is expected to generate 1.43 times less return on investment than Tax-managed. In addition to that, Washington Mutual is 1.35 times more volatile than Tax Managed Large Cap. It trades about 0.06 of its total potential returns per unit of risk. Tax Managed Large Cap is currently generating about 0.11 per unit of volatility. If you would invest 6,042 in Tax Managed Large Cap on September 1, 2024 and sell it today you would earn a total of 2,737 from holding Tax Managed Large Cap or generate 45.3% 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. Tax Managed Large Cap
Performance |
| Timeline |
| Washington Mutual |
| Tax Managed Large |
Washington Mutual and Tax-managed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Washington Mutual and Tax-managed
The main advantage of trading using opposite Washington Mutual and Tax-managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Washington Mutual position performs unexpectedly, Tax-managed 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 Tax-managed will offset losses from the drop in Tax-managed'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 |
| Tax-managed vs. International Developed Markets | Tax-managed vs. Global Real Estate | Tax-managed vs. Global Real Estate | Tax-managed vs. Global Real Estate |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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