Correlation Between Washington Mutual and High Yield
Can any of the company-specific risk be diversified away by investing in both Washington Mutual and High Yield 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 High Yield 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 High Yield Fund, you can compare the effects of market volatilities on Washington Mutual and High Yield 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 High Yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Washington Mutual and High Yield.
Diversification Opportunities for Washington Mutual and High Yield
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Washington and High is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Washington Mutual Investors and High Yield Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Yield 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 High Yield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Yield Fund has no effect on the direction of Washington Mutual i.e., Washington Mutual and High Yield go up and down completely randomly.
Pair Corralation between Washington Mutual and High Yield
Assuming the 90 days horizon Washington Mutual Investors is expected to generate 3.4 times more return on investment than High Yield. However, Washington Mutual is 3.4 times more volatile than High Yield Fund. It trades about 0.06 of its potential returns per unit of risk. High Yield Fund is currently generating about 0.13 per unit of risk. If you would invest 5,007 in Washington Mutual Investors on September 12, 2024 and sell it today you would earn a total of 1,504 from holding Washington Mutual Investors or generate 30.04% 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. High Yield Fund
Performance |
| Timeline |
| Washington Mutual |
| High Yield Fund |
Washington Mutual and High Yield Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Washington Mutual and High Yield
The main advantage of trading using opposite Washington Mutual and High Yield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Washington Mutual position performs unexpectedly, High Yield 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 High Yield will offset losses from the drop in High Yield's long position.| Washington Mutual vs. Schwab Small Cap Index | Washington Mutual vs. Schwab Total Stock | Washington Mutual vs. Schwab International Index | Washington Mutual vs. Schwab Sp 500 |
| High Yield vs. Fisher Large Cap | High Yield vs. Upright Assets Allocation | High Yield vs. Jhancock Disciplined Value | High Yield vs. Washington Mutual Investors |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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