Correlation Between Washington Federal and Banner

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

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

Diversification Opportunities for Washington Federal and Banner

-0.47

Correlation Coefficient

Washington Federal  Banner

Very good diversification

The 3 months correlation between Washington and Banner is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Washington Federal and Banner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banner 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 Banner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banner has no effect on the direction of Washington Federal i.e., Washington Federal and Banner go up and down completely randomly.

Pair Corralation between Washington Federal and Banner

Assuming the 90 days horizon Washington Federal is expected to generate 0.64 times more return on investment than Banner. However, Washington Federal is 1.55 times less risky than Banner. It trades about -0.32 of its potential returns per unit of risk. Banner is currently generating about -0.24 per unit of risk. If you would invest  1,769  in Washington Federal on October 15, 2024 and sell it today you would lose (126.00) from holding Washington Federal or give up 7.12% of portfolio value over 90 days.

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

Washington Federal  vs.  Banner

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. Even with weak performance in the last few months, the Preferred Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Banner

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Banner are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Banner is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Washington Federal and Banner

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

The idea behind Washington Federal and Banner 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.