Correlation Between Washington Federal and Hanover Bancorp

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

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

Diversification Opportunities for Washington Federal and Hanover Bancorp

-0.63

Correlation Coefficient

Washington Federal  Hanover Bancorp

Excellent diversification

The 3 months correlation between Washington and Hanover is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Washington Federal and Hanover Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Bancorp 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 Hanover Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanover Bancorp has no effect on the direction of Washington Federal i.e., Washington Federal and Hanover Bancorp go up and down completely randomly.

Pair Corralation between Washington Federal and Hanover Bancorp

Assuming the 90 days horizon Washington Federal is expected to generate 0.56 times more return on investment than Hanover Bancorp. However, Washington Federal is 1.79 times less risky than Hanover Bancorp. It trades about -0.13 of its potential returns per unit of risk. Hanover Bancorp is currently generating about -0.28 per unit of risk. If you would invest  1,771  in Washington Federal on October 10, 2024 and sell it today you would lose (59.00) from holding Washington Federal or give up 3.33% of portfolio value over 90 days.

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

Washington Federal  vs.  Hanover Bancorp

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 latest weak performance, the Preferred Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Hanover Bancorp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hanover Bancorp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Hanover Bancorp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Washington Federal and Hanover Bancorp

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

The idea behind Washington Federal and Hanover Bancorp 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .