Correlation Between Washington Federal and Laurentian Bank

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

Diversification Opportunities for Washington Federal and Laurentian Bank

0.12

Correlation Coefficient

Washington Federal  Laurentian Bank

Average diversification

The 3 months correlation between Washington and Laurentian is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Washington Federal and Laurentian Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laurentian 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 Laurentian Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laurentian Bank has no effect on the direction of Washington Federal i.e., Washington Federal and Laurentian Bank go up and down completely randomly.

Pair Corralation between Washington Federal and Laurentian Bank

Given the investment horizon of 90 days Washington Federal is expected to under-perform the Laurentian Bank. In addition to that, Washington Federal is 1.6 times more volatile than Laurentian Bank of. It trades about -0.31 of its total potential returns per unit of risk. Laurentian Bank of is currently generating about -0.34 per unit of volatility. If you would invest  2,150  in Laurentian Bank of on October 12, 2024 and sell it today you would lose (160.00) from holding Laurentian Bank of or give up 7.44% of portfolio value over 90 days.

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

Washington Federal  vs.  Laurentian Bank of

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 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.

Laurentian Bank

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Laurentian Bank of are ranked lower than 4 (%) 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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Washington Federal and Laurentian Bank

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

The idea behind Washington Federal and Laurentian Bank of 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.