Correlation Between United Bank and Oil
Can any of the company-specific risk be diversified away by investing in both United Bank and Oil 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 United Bank and Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Bank and Oil and Gas, you can compare the effects of market volatilities on United Bank and Oil 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 United Bank with a short position of Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Bank and Oil.
Diversification Opportunities for United Bank and Oil
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between United and Oil is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding United Bank and Oil and Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil and Gas and United Bank 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 United Bank are associated (or correlated) with Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil and Gas has no effect on the direction of United Bank i.e., United Bank and Oil go up and down completely randomly.
Pair Corralation between United Bank and Oil
Assuming the 90 days trading horizon United Bank is expected to generate 1.45 times less return on investment than Oil. But when comparing it to its historical volatility, United Bank is 1.17 times less risky than Oil. It trades about 0.34 of its potential returns per unit of risk. Oil and Gas is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest 16,637 in Oil and Gas on August 24, 2024 and sell it today you would earn a total of 3,329 from holding Oil and Gas or generate 20.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Bank vs. Oil and Gas
Performance |
| Timeline |
| United Bank |
| Oil and Gas |
United Bank and Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Bank and Oil
The main advantage of trading using opposite United Bank and Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Bank position performs unexpectedly, Oil 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 Oil will offset losses from the drop in Oil's long position.| United Bank vs. Habib Bank | United Bank vs. National Bank of | United Bank vs. MCB Bank | United Bank vs. Allied Bank |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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