Correlation Between Laurentian Bank and Washington Federal

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

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

Diversification Opportunities for Laurentian Bank and Washington Federal

0.13

Correlation Coefficient

Laurentian Bank  Washington Federal

Average diversification

The 3 months correlation between Laurentian and Washington is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Laurentian Bank of and Washington Federal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Washington Federal and Laurentian Bank 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 Laurentian Bank of 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 Laurentian Bank i.e., Laurentian Bank and Washington Federal go up and down completely randomly.

Pair Corralation between Laurentian Bank and Washington Federal

Assuming the 90 days horizon Laurentian Bank of is expected to generate 0.04 times more return on investment than Washington Federal. However, Laurentian Bank of is 23.35 times less risky than Washington Federal. It trades about -0.23 of its potential returns per unit of risk. Washington Federal is currently generating about -0.3 per unit of risk. If you would invest  1,997  in Laurentian Bank of on October 27, 2024 and sell it today you would lose (7.00) from holding Laurentian Bank of or give up 0.35% of portfolio value over 90 days.

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

Laurentian Bank of  vs.  Washington Federal

Laurentian Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Laurentian Bank of are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Laurentian Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 Laurentian Bank and Washington Federal

The main advantage of trading using opposite Laurentian Bank and Washington Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Laurentian Bank 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 Laurentian Bank of 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.