Correlation Between Washington Federal and Hawthorn Bancshares

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

Diversification Opportunities for Washington Federal and Hawthorn Bancshares

-0.71

Correlation Coefficient

Washington Federal  Hawthorn Bancshares

Pay attention - limited upside

The 3 months correlation between Washington and Hawthorn is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Washington Federal and Hawthorn Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hawthorn 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 Hawthorn Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hawthorn Bancshares has no effect on the direction of Washington Federal i.e., Washington Federal and Hawthorn Bancshares go up and down completely randomly.

Pair Corralation between Washington Federal and Hawthorn Bancshares

Assuming the 90 days horizon Washington Federal is expected to under-perform the Hawthorn Bancshares. But the preferred stock apears to be less risky and, when comparing its historical volatility, Washington Federal is 2.27 times less risky than Hawthorn Bancshares. The preferred stock trades about -0.1 of its potential returns per unit of risk. The Hawthorn Bancshares is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,476  in Hawthorn Bancshares on October 23, 2024 and sell it today you would earn a total of  479.00  from holding Hawthorn Bancshares or generate 19.35% return on investment over 90 days.

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

Washington Federal  vs.  Hawthorn 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 latest inconsistent 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.

Hawthorn Bancshares

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hawthorn Bancshares are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady fundamental drivers, Hawthorn Bancshares disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Washington Federal and Hawthorn Bancshares

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

The idea behind Washington Federal and Hawthorn 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.

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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.