Correlation Between Franklin Financial and Washington Federal

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

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

Diversification Opportunities for Franklin Financial and Washington Federal

-0.71

Correlation Coefficient

Franklin Financial  Washington Federal

Pay attention - limited upside

The 3 months correlation between Franklin and Washington is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Financial Services and Washington Federal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Washington Federal and Franklin Financial 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 Franklin Financial Services 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 Franklin Financial i.e., Franklin Financial and Washington Federal go up and down completely randomly.

Pair Corralation between Franklin Financial and Washington Federal

Given the investment horizon of 90 days Franklin Financial Services is expected to generate 0.99 times more return on investment than Washington Federal. However, Franklin Financial Services is 1.01 times less risky than Washington Federal. It trades about 0.18 of its potential returns per unit of risk. Washington Federal is currently generating about -0.11 per unit of risk. If you would invest  2,964  in Franklin Financial Services on December 31, 2024 and sell it today you would earn a total of  576.00  from holding Franklin Financial Services or generate 19.43% return on investment over 90 days.

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

Franklin Financial Services  vs.  Washington Federal

Franklin Financial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Financial Services are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Franklin Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Washington Federal

Risk-Adjusted Performance

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 latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Franklin Financial and Washington Federal

The main advantage of trading using opposite Franklin Financial and Washington Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Financial 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 Franklin Financial Services 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.