Correlation Between United Bankshares and Home Bancorp
Can any of the company-specific risk be diversified away by investing in both United Bankshares and Home Bancorp 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 Home Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Bankshares and Home Bancorp, you can compare the effects of market volatilities on United Bankshares and Home Bancorp 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 Home Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Bankshares and Home Bancorp.
Diversification Opportunities for United Bankshares and Home Bancorp
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and Home is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding United Bankshares and Home Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Bancorp 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 Home Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Bancorp has no effect on the direction of United Bankshares i.e., United Bankshares and Home Bancorp go up and down completely randomly.
Pair Corralation between United Bankshares and Home Bancorp
Given the investment horizon of 90 days United Bankshares is expected to generate 2.19 times less return on investment than Home Bancorp. But when comparing it to its historical volatility, United Bankshares is 1.22 times less risky than Home Bancorp. It trades about 0.04 of its potential returns per unit of risk. Home Bancorp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 3,761 in Home Bancorp on November 9, 2024 and sell it today you would earn a total of 1,488 from holding Home Bancorp or generate 39.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Bankshares vs. Home Bancorp
Performance |
| Timeline |
| United Bankshares |
| Home Bancorp |
United Bankshares and Home Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Bankshares and Home Bancorp
The main advantage of trading using opposite United Bankshares and Home Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Bankshares position performs unexpectedly, Home Bancorp 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 Home Bancorp will offset losses from the drop in Home Bancorp's long position.| United Bankshares vs. Peoples Bancorp | United Bankshares vs. Eagle Bancorp | United Bankshares vs. Northrim BanCorp | United Bankshares vs. Pacific Premier Bancorp |
| Home Bancorp vs. Home Federal Bancorp | Home Bancorp vs. Community West Bancshares | Home Bancorp vs. First Financial Northwest | Home Bancorp vs. First Capital |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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