Correlation Between Washington Federal and Amalgamated Bank

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

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

Diversification Opportunities for Washington Federal and Amalgamated Bank

0.74

Correlation Coefficient

Washington Federal  Amalgamated Bank

Poor diversification

The 3 months correlation between Washington and Amalgamated is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Washington Federal and Amalgamated Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amalgamated Bank and Washington Federal 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 Washington Federal are associated (or correlated) with Amalgamated Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amalgamated Bank has no effect on the direction of Washington Federal i.e., Washington Federal and Amalgamated Bank go up and down completely randomly.

Pair Corralation between Washington Federal and Amalgamated Bank

Given the investment horizon of 90 days Washington Federal is expected to under-perform the Amalgamated Bank. But the stock apears to be less risky and, when comparing its historical volatility, Washington Federal is 1.13 times less risky than Amalgamated Bank. The stock trades about 0.0 of its potential returns per unit of risk. The Amalgamated Bank is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,158  in Amalgamated Bank on September 17, 2024 and sell it today you would earn a total of  336.00  from holding Amalgamated Bank or generate 10.64% return on investment over 90 days.

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

Washington Federal  vs.  Amalgamated Bank

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 rather sound technical and fundamental indicators, Washington Federal is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Amalgamated Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Amalgamated Bank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Amalgamated Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Washington Federal and Amalgamated Bank

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

The idea behind Washington Federal and Amalgamated Bank 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.