Correlation Between Washington Federal and United Community

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

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

Diversification Opportunities for Washington Federal and United Community

-0.14

Correlation Coefficient

Washington Federal  United Community

Good diversification

The 3 months correlation between Washington and United is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Washington Federal and United Community Banks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Community Banks 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 United Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Community Banks has no effect on the direction of Washington Federal i.e., Washington Federal and United Community go up and down completely randomly.

Pair Corralation between Washington Federal and United Community

Assuming the 90 days horizon Washington Federal is expected to generate 1.8 times more return on investment than United Community. However, Washington Federal is 1.8 times more volatile than United Community Banks. It trades about 0.06 of its potential returns per unit of risk. United Community Banks is currently generating about -0.03 per unit of risk. If you would invest  1,728  in Washington Federal on September 2, 2024 and sell it today you would earn a total of  75.00  from holding Washington Federal or generate 4.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	42.19%
Values	Daily Returns

Washington Federal  vs.  United Community Banks

Washington Federal

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Washington Federal are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

United Community Banks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Community Banks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, United Community is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Washington Federal and United Community

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

The idea behind Washington Federal and United Community Banks 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 .