Correlation Between Bank of Idaho Holding and Washington Federal

Can any of the company-specific risk be diversified away by investing in both Bank of Idaho Holding and Washington Federal 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 Bank of Idaho Holding and Washington Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bank of Idaho and Washington Federal, you can compare the effects of market volatilities on Bank of Idaho Holding and Washington Federal 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 Bank of Idaho Holding with a short position of Washington Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Idaho Holding and Washington Federal.

Diversification Opportunities for Bank of Idaho Holding and Washington Federal

-0.63

Correlation Coefficient

Bank of Idaho Holding  Washington Federal

Excellent diversification

The 3 months correlation between Bank and Washington is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Idaho and Washington Federal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Washington Federal and Bank of Idaho Holding 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 Bank of Idaho are associated (or correlated) with Washington Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Washington Federal has no effect on the direction of Bank of Idaho Holding i.e., Bank of Idaho Holding and Washington Federal go up and down completely randomly.

Pair Corralation between Bank of Idaho Holding and Washington Federal

Given the investment horizon of 90 days Bank of Idaho is expected to generate 4.67 times more return on investment than Washington Federal. However, Bank of Idaho Holding is 4.67 times more volatile than Washington Federal. It trades about 0.3 of its potential returns per unit of risk. Washington Federal is currently generating about -0.3 per unit of risk. If you would invest  3,335  in Bank of Idaho on October 27, 2024 and sell it today you would earn a total of  1,875  from holding Bank of Idaho or generate 56.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Bank of Idaho  vs.  Washington Federal

Bank of Idaho Holding

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Idaho are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward indicators, Bank of Idaho Holding exhibited solid returns over the last few months and may actually be approaching a breakup point.

Washington Federal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Washington Federal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Bank of Idaho Holding and Washington Federal

The main advantage of trading using opposite Bank of Idaho Holding and Washington Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Idaho Holding position performs unexpectedly, Washington Federal 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 Washington Federal will offset losses from the drop in Washington Federal's long position.

The idea behind Bank of Idaho and Washington Federal pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..