Correlation Between First Business and United Bankshares
Can any of the company-specific risk be diversified away by investing in both First Business and United Bankshares 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 First Business and United Bankshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Business Financial and United Bankshares, you can compare the effects of market volatilities on First Business and United Bankshares 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 First Business with a short position of United Bankshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Business and United Bankshares.
Diversification Opportunities for First Business and United Bankshares
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and United is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding First Business Financial and United Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Bankshares and First Business 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 First Business Financial are associated (or correlated) with United Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Bankshares has no effect on the direction of First Business i.e., First Business and United Bankshares go up and down completely randomly.
Pair Corralation between First Business and United Bankshares
Given the investment horizon of 90 days First Business Financial is expected to generate 1.08 times more return on investment than United Bankshares. However, First Business is 1.08 times more volatile than United Bankshares. It trades about 0.06 of its potential returns per unit of risk. United Bankshares is currently generating about 0.01 per unit of risk. If you would invest 3,441 in First Business Financial on November 9, 2024 and sell it today you would earn a total of 2,194 from holding First Business Financial or generate 63.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Business Financial vs. United Bankshares
Performance |
| Timeline |
| First Business Financial |
| United Bankshares |
First Business and United Bankshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Business and United Bankshares
The main advantage of trading using opposite First Business and United Bankshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Business position performs unexpectedly, United Bankshares 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 United Bankshares will offset losses from the drop in United Bankshares' long position.| First Business vs. Home Federal Bancorp | First Business vs. Lake Shore Bancorp | First Business vs. Old Point Financial | First Business vs. Parke Bancorp |
| United Bankshares vs. Peoples Bancorp | United Bankshares vs. Eagle Bancorp | United Bankshares vs. Northrim BanCorp | United Bankshares vs. Pacific Premier Bancorp |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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