Correlation Between Washington Mutual and Eagle Capital

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

By analyzing existing cross correlation between Washington Mutual Investors and Eagle Capital Appreciation, you can compare the effects of market volatilities on Washington Mutual and Eagle Capital 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 Mutual with a short position of Eagle Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Washington Mutual and Eagle Capital.

Diversification Opportunities for Washington Mutual and Eagle Capital

0.91

Correlation Coefficient

Washington Mutual  Eagle Capital

Almost no diversification

The 3 months correlation between Washington and Eagle is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Washington Mutual Investors and Eagle Capital Appreciation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Capital Apprec and Washington Mutual 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 Mutual Investors are associated (or correlated) with Eagle Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Capital Apprec has no effect on the direction of Washington Mutual i.e., Washington Mutual and Eagle Capital go up and down completely randomly.

Pair Corralation between Washington Mutual and Eagle Capital

Assuming the 90 days horizon Washington Mutual is expected to generate 2.26 times less return on investment than Eagle Capital. But when comparing it to its historical volatility, Washington Mutual Investors is 1.58 times less risky than Eagle Capital. It trades about 0.13 of its potential returns per unit of risk. Eagle Capital Appreciation is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  5,914  in Eagle Capital Appreciation on August 31, 2024 and sell it today you would earn a total of  740.00  from holding Eagle Capital Appreciation or generate 12.51% return on investment over 90 days.

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

Washington Mutual Investors  vs.  Eagle Capital Appreciation

Washington Mutual

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Washington Mutual Investors are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Washington Mutual is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Eagle Capital Apprec

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Capital Appreciation are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Eagle Capital may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Washington Mutual and Eagle Capital

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

The idea behind Washington Mutual Investors and Eagle Capital Appreciation 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..