Correlation Between Washington Federal and First Mid

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

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

Diversification Opportunities for Washington Federal and First Mid

0.88

Correlation Coefficient

Washington Federal  First Mid

Very poor diversification

The 3 months correlation between Washington and First is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Washington Federal and First Mid Illinois in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Mid Illinois 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 First Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Mid Illinois has no effect on the direction of Washington Federal i.e., Washington Federal and First Mid go up and down completely randomly.

Pair Corralation between Washington Federal and First Mid

Given the investment horizon of 90 days Washington Federal is expected to generate 1.2 times more return on investment than First Mid. However, Washington Federal is 1.2 times more volatile than First Mid Illinois. It trades about 0.01 of its potential returns per unit of risk. First Mid Illinois is currently generating about -0.02 per unit of risk. If you would invest  2,920  in Washington Federal on February 3, 2025 and sell it today you would lose (12.00) from holding Washington Federal or give up 0.41% of portfolio value over 90 days.

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

Washington Federal  vs.  First Mid Illinois

Washington Federal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Washington Federal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Washington Federal is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

First Mid Illinois

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Mid Illinois has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, First Mid is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Washington Federal and First Mid

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

The idea behind Washington Federal and First Mid Illinois 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.