Correlation Between United Bankshares and First Business
Can any of the company-specific risk be diversified away by investing in both United Bankshares and First Business 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 Bankshares and First Business into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Bankshares and First Business Financial, you can compare the effects of market volatilities on United Bankshares and First Business 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 Bankshares with a short position of First Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Bankshares and First Business.
Diversification Opportunities for United Bankshares and First Business
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between United and First is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding United Bankshares and First Business Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Business Financial and United Bankshares 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 Bankshares are associated (or correlated) with First Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Business Financial has no effect on the direction of United Bankshares i.e., United Bankshares and First Business go up and down completely randomly.
Pair Corralation between United Bankshares and First Business
Given the investment horizon of 90 days United Bankshares is expected to generate 4.19 times less return on investment than First Business. But when comparing it to its historical volatility, United Bankshares is 1.08 times less risky than First Business. It trades about 0.01 of its potential returns per unit of risk. First Business Financial is currently generating about 0.06 of returns per unit of risk over similar time horizon. 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 |
United Bankshares vs. First Business Financial
Performance |
| Timeline |
| United Bankshares |
| First Business Financial |
United Bankshares and First Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Bankshares and First Business
The main advantage of trading using opposite United Bankshares and First Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Bankshares position performs unexpectedly, First Business 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 Business will offset losses from the drop in First Business' long position.| United Bankshares vs. Peoples Bancorp | United Bankshares vs. Eagle Bancorp | United Bankshares vs. Northrim BanCorp | United Bankshares vs. Pacific Premier Bancorp |
| First Business vs. Home Federal Bancorp | First Business vs. Lake Shore Bancorp | First Business vs. Old Point Financial | First Business vs. Parke 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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