Correlation Between Washington Federal and First Western

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

By analyzing existing cross correlation between Washington Federal and First Western Financial, you can compare the effects of market volatilities on Washington Federal and First Western 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 First Western. Check out your portfolio center. Please also check ongoing floating volatility patterns of Washington Federal and First Western.

Diversification Opportunities for Washington Federal and First Western

-0.22

Correlation Coefficient

Washington Federal  First Western

Very good diversification

The 3 months correlation between Washington and First is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Washington Federal and First Western Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Western Financial 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 First Western. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Western Financial has no effect on the direction of Washington Federal i.e., Washington Federal and First Western go up and down completely randomly.

Pair Corralation between Washington Federal and First Western

Given the investment horizon of 90 days Washington Federal is expected to under-perform the First Western. But the stock apears to be less risky and, when comparing its historical volatility, Washington Federal is 1.56 times less risky than First Western. The stock trades about -0.13 of its potential returns per unit of risk. The First Western Financial is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,929  in First Western Financial on December 21, 2024 and sell it today you would earn a total of  9.00  from holding First Western Financial or generate 0.47% return on investment over 90 days.

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

Washington Federal  vs.  First Western Financial

Washington Federal

Risk-Adjusted Performance

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 unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

First Western Financial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Western Financial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable technical and fundamental indicators, First Western is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Washington Federal and First Western

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

The idea behind Washington Federal and First Western Financial 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.