Correlation Between United Bankshares and National Bankshares
Can any of the company-specific risk be diversified away by investing in both United Bankshares and National 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 United Bankshares and National Bankshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Bankshares and National Bankshares, you can compare the effects of market volatilities on United Bankshares and National 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 United Bankshares with a short position of National Bankshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Bankshares and National Bankshares.
Diversification Opportunities for United Bankshares and National Bankshares
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between United and National is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding United Bankshares and National Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bankshares 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 National Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bankshares has no effect on the direction of United Bankshares i.e., United Bankshares and National Bankshares go up and down completely randomly.
Pair Corralation between United Bankshares and National Bankshares
Given the investment horizon of 90 days United Bankshares is expected to generate 0.67 times more return on investment than National Bankshares. However, United Bankshares is 1.5 times less risky than National Bankshares. It trades about 0.07 of its potential returns per unit of risk. National Bankshares is currently generating about 0.04 per unit of risk. If you would invest 3,170 in United Bankshares on August 24, 2024 and sell it today you would earn a total of 1,004 from holding United Bankshares or generate 31.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Bankshares vs. National Bankshares
Performance |
| Timeline |
| United Bankshares |
| National Bankshares |
United Bankshares and National Bankshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Bankshares and National Bankshares
The main advantage of trading using opposite United Bankshares and National Bankshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Bankshares position performs unexpectedly, National 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 National Bankshares will offset losses from the drop in National Bankshares' long position.| United Bankshares vs. Peoples Bancorp | United Bankshares vs. Eagle Bancorp | United Bankshares vs. Northrim BanCorp | United Bankshares vs. Pacific Premier Bancorp |
| National Bankshares vs. Finward Bancorp | National Bankshares vs. Community West Bancshares | National Bankshares vs. First Financial Northwest | National Bankshares vs. Oak Valley 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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