Correlation Between US Bancorp and Washington Federal

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

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

Diversification Opportunities for US Bancorp and Washington Federal

0.69

Correlation Coefficient

US Bancorp  Washington Federal

Poor diversification

The 3 months correlation between USB-PP and Washington is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding US Bancorp and Washington Federal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Washington Federal and US Bancorp 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 US Bancorp 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 US Bancorp i.e., US Bancorp and Washington Federal go up and down completely randomly.

Pair Corralation between US Bancorp and Washington Federal

Assuming the 90 days trading horizon US Bancorp is expected to generate 0.62 times more return on investment than Washington Federal. However, US Bancorp is 1.61 times less risky than Washington Federal. It trades about 0.13 of its potential returns per unit of risk. Washington Federal is currently generating about -0.3 per unit of risk. If you would invest  2,328  in US Bancorp on October 27, 2024 and sell it today you would earn a total of  67.00  from holding US Bancorp or generate 2.88% return on investment over 90 days.

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

US Bancorp  vs.  Washington Federal

US Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, US Bancorp 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

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 US Bancorp and Washington Federal

The main advantage of trading using opposite US Bancorp and Washington Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Bancorp 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 US Bancorp 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.