Correlation Between Pinnacle Financial and Washington Federal

Can any of the company-specific risk be diversified away by investing in both Pinnacle 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 Pinnacle 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 Pinnacle Financial Partners and Washington Federal, you can compare the effects of market volatilities on Pinnacle 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 Pinnacle Financial with a short position of Washington Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pinnacle Financial and Washington Federal.

Diversification Opportunities for Pinnacle Financial and Washington Federal

-0.08

Correlation Coefficient

Pinnacle Financial  Washington Federal

Good diversification

The 3 months correlation between Pinnacle and Washington is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Pinnacle Financial Partners and Washington Federal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Washington Federal and Pinnacle 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 Pinnacle Financial Partners 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 Pinnacle Financial i.e., Pinnacle Financial and Washington Federal go up and down completely randomly.

Pair Corralation between Pinnacle Financial and Washington Federal

Assuming the 90 days horizon Pinnacle Financial is expected to generate 1.03 times less return on investment than Washington Federal. But when comparing it to its historical volatility, Pinnacle Financial Partners is 2.83 times less risky than Washington Federal. It trades about 0.16 of its potential returns per unit of risk. Washington Federal is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,728  in Washington Federal on September 2, 2024 and sell it today you would earn a total of  75.00  from holding Washington Federal or generate 4.34% return on investment over 90 days.

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

Pinnacle Financial Partners  vs.  Washington Federal

Pinnacle Financial

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pinnacle Financial Partners are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Pinnacle Financial is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Washington Federal

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Washington Federal are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Washington Federal is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Pinnacle Financial and Washington Federal

The main advantage of trading using opposite Pinnacle Financial and Washington Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pinnacle 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 Pinnacle Financial Partners 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.