Correlation Between Washington Federal and First Bancshares

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

Diversification Opportunities for Washington Federal and First Bancshares

-0.44

Correlation Coefficient

Washington Federal  First Bancshares

Very good diversification

The 3 months correlation between Washington and First is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Washington Federal and First Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Bancshares 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 Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Bancshares has no effect on the direction of Washington Federal i.e., Washington Federal and First Bancshares go up and down completely randomly.

Pair Corralation between Washington Federal and First Bancshares

Assuming the 90 days horizon Washington Federal is expected to generate 0.33 times more return on investment than First Bancshares. However, Washington Federal is 3.01 times less risky than First Bancshares. It trades about 0.02 of its potential returns per unit of risk. First Bancshares is currently generating about -0.04 per unit of risk. If you would invest  1,713  in Washington Federal on October 27, 2024 and sell it today you would earn a total of  5.00  from holding Washington Federal or generate 0.29% return on investment over 90 days.

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

Washington Federal  vs.  First Bancshares

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 relatively invariable fundamental indicators, Washington Federal is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

First Bancshares

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Bancshares are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, First Bancshares sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Washington Federal and First Bancshares

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

The idea behind Washington Federal and First Bancshares 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.

Check out your portfolio center.

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 Money Managers module to screen money managers from public funds and ETFs managed around the world.