Correlation Between Washington Federal and Ponce Financial

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

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

Diversification Opportunities for Washington Federal and Ponce Financial

-0.76

Correlation Coefficient

Washington Federal  Ponce Financial

Pay attention - limited upside

The 3 months correlation between Washington and Ponce is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Washington Federal and Ponce Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ponce Financial Group 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 Ponce Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ponce Financial Group has no effect on the direction of Washington Federal i.e., Washington Federal and Ponce Financial go up and down completely randomly.

Pair Corralation between Washington Federal and Ponce Financial

Assuming the 90 days horizon Washington Federal is expected to under-perform the Ponce Financial. But the preferred stock apears to be less risky and, when comparing its historical volatility, Washington Federal is 1.26 times less risky than Ponce Financial. The preferred stock trades about -0.19 of its potential returns per unit of risk. The Ponce Financial Group is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,318  in Ponce Financial Group on October 11, 2024 and sell it today you would lose (16.00) from holding Ponce Financial Group or give up 1.21% 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.  Ponce Financial Group

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.

Ponce Financial Group

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ponce Financial Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile essential indicators, Ponce Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Washington Federal and Ponce Financial

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

The idea behind Washington Federal and Ponce Financial Group 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 Transaction History module to view history of all your transactions and understand their impact on performance.