Correlation Between Bright Rock and Washington Mutual
Can any of the company-specific risk be diversified away by investing in both Bright Rock and Washington Mutual 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 Bright Rock and Washington Mutual into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bright Rock Quality and Washington Mutual Investors, you can compare the effects of market volatilities on Bright Rock and Washington Mutual 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 Bright Rock with a short position of Washington Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bright Rock and Washington Mutual.
Diversification Opportunities for Bright Rock and Washington Mutual
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Bright and Washington is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Bright Rock Quality and Washington Mutual Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Washington Mutual and Bright Rock 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 Bright Rock Quality are associated (or correlated) with Washington Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Washington Mutual has no effect on the direction of Bright Rock i.e., Bright Rock and Washington Mutual go up and down completely randomly.
Pair Corralation between Bright Rock and Washington Mutual
Assuming the 90 days horizon Bright Rock Quality is expected to generate 1.1 times more return on investment than Washington Mutual. However, Bright Rock is 1.1 times more volatile than Washington Mutual Investors. It trades about 0.07 of its potential returns per unit of risk. Washington Mutual Investors is currently generating about 0.07 per unit of risk. If you would invest 1,652 in Bright Rock Quality on January 25, 2024 and sell it today you would earn a total of 579.00 from holding Bright Rock Quality or generate 35.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bright Rock Quality vs. Washington Mutual Investors
Performance |
| Timeline |
| Bright Rock Quality |
| Washington Mutual |
Bright Rock and Washington Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bright Rock and Washington Mutual
The main advantage of trading using opposite Bright Rock and Washington Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bright Rock position performs unexpectedly, Washington Mutual 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 Mutual will offset losses from the drop in Washington Mutual's long position.The idea behind Bright Rock Quality and Washington Mutual Investors 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.| Washington Mutual vs. T Rowe Price | Washington Mutual vs. T Rowe Price | Washington Mutual vs. T Rowe Price | Washington Mutual vs. T Rowe Price |
Check out your portfolio center.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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
Other Complementary Tools
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios |