Correlation Between First Capital and BankUnited
Can any of the company-specific risk be diversified away by investing in both First Capital and BankUnited 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 Capital and BankUnited into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Capital and BankUnited, you can compare the effects of market volatilities on First Capital and BankUnited 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 Capital with a short position of BankUnited. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Capital and BankUnited.
Diversification Opportunities for First Capital and BankUnited
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and BankUnited is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding First Capital and BankUnited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BankUnited and First Capital 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 Capital are associated (or correlated) with BankUnited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BankUnited has no effect on the direction of First Capital i.e., First Capital and BankUnited go up and down completely randomly.
Pair Corralation between First Capital and BankUnited
Given the investment horizon of 90 days First Capital is expected to under-perform the BankUnited. But the stock apears to be less risky and, when comparing its historical volatility, First Capital is 1.65 times less risky than BankUnited. The stock trades about -0.19 of its potential returns per unit of risk. The BankUnited is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 3,540 in BankUnited on September 2, 2024 and sell it today you would earn a total of 667.00 from holding BankUnited or generate 18.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Capital vs. BankUnited
Performance |
| Timeline |
| First Capital |
| BankUnited |
First Capital and BankUnited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Capital and BankUnited
The main advantage of trading using opposite First Capital and BankUnited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Capital position performs unexpectedly, BankUnited 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 BankUnited will offset losses from the drop in BankUnited's long position.| First Capital vs. Affinity Bancshares | First Capital vs. Auburn National Bancorporation | First Capital vs. BayCom Corp | First Capital vs. First Community |
| BankUnited vs. International Bancshares | BankUnited vs. Hilltop Holdings | BankUnited vs. FB Financial Corp | BankUnited vs. Red River Bancshares |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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