Correlation Between Veritex Holdings and Washington Federal

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

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

Diversification Opportunities for Veritex Holdings and Washington Federal

0.7

Correlation Coefficient

Veritex Holdings  Washington Federal

Poor diversification

The 3 months correlation between Veritex and Washington is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Veritex Holdings and Washington Federal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Washington Federal and Veritex Holdings 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 Veritex Holdings are associated (or correlated) with Washington Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Washington Federal has no effect on the direction of Veritex Holdings i.e., Veritex Holdings and Washington Federal go up and down completely randomly.

Pair Corralation between Veritex Holdings and Washington Federal

Given the investment horizon of 90 days Veritex Holdings is expected to generate 1.23 times more return on investment than Washington Federal. However, Veritex Holdings is 1.23 times more volatile than Washington Federal. It trades about -0.03 of its potential returns per unit of risk. Washington Federal is currently generating about -0.13 per unit of risk. If you would invest  3,034  in Veritex Holdings on September 13, 2024 and sell it today you would lose (39.00) from holding Veritex Holdings or give up 1.29% of portfolio value over 90 days.

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

Veritex Holdings  vs.  Washington Federal

Veritex Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Veritex Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Veritex Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Washington Federal

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Washington Federal are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Washington Federal is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Veritex Holdings and Washington Federal

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

The idea behind Veritex Holdings and Washington Federal 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.