Correlation Between Washington Federal and Cadence Bank

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

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

Diversification Opportunities for Washington Federal and Cadence Bank

-0.57

Correlation Coefficient

Washington Federal  Cadence Bank

Excellent diversification

The 3 months correlation between Washington and Cadence is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Washington Federal and Cadence Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cadence Bank 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 Cadence Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cadence Bank has no effect on the direction of Washington Federal i.e., Washington Federal and Cadence Bank go up and down completely randomly.

Pair Corralation between Washington Federal and Cadence Bank

Given the investment horizon of 90 days Washington Federal is expected to generate 1.54 times more return on investment than Cadence Bank. However, Washington Federal is 1.54 times more volatile than Cadence Bank. It trades about 0.02 of its potential returns per unit of risk. Cadence Bank is currently generating about 0.03 per unit of risk. If you would invest  3,177  in Washington Federal on September 3, 2024 and sell it today you would earn a total of  481.00  from holding Washington Federal or generate 15.14% return on investment over 90 days.

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

Washington Federal  vs.  Cadence Bank

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.

Cadence Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cadence Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Cadence Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Washington Federal and Cadence Bank

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

The idea behind Washington Federal and Cadence Bank 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.