Correlation Between Washington Federal and Affinity Bancshares

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

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

Diversification Opportunities for Washington Federal and Affinity Bancshares

0.08

Correlation Coefficient

Washington Federal  Affinity Bancshares

Significant diversification

The 3 months correlation between Washington and Affinity is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Washington Federal and Affinity Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Affinity Bancshares 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 Affinity Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Affinity Bancshares has no effect on the direction of Washington Federal i.e., Washington Federal and Affinity Bancshares go up and down completely randomly.

Pair Corralation between Washington Federal and Affinity Bancshares

Assuming the 90 days horizon Washington Federal is expected to generate 7.36 times less return on investment than Affinity Bancshares. But when comparing it to its historical volatility, Washington Federal is 1.48 times less risky than Affinity Bancshares. It trades about 0.02 of its potential returns per unit of risk. Affinity Bancshares is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,743  in Affinity Bancshares on February 17, 2025 and sell it today you would earn a total of  109.00  from holding Affinity Bancshares or generate 6.25% return on investment over 90 days.

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

Washington Federal  vs.  Affinity Bancshares

Washington Federal

Risk-Adjusted Performance

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. Even with relatively invariable fundamental indicators, Washington Federal is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Affinity Bancshares

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Affinity Bancshares are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady fundamental drivers, Affinity Bancshares may actually be approaching a critical reversion point that can send shares even higher in June 2025.

Pair Trading with Washington Federal and Affinity Bancshares

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

The idea behind Washington Federal and Affinity Bancshares 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.