Correlation Between United Bankshares and Washington Trust
Can any of the company-specific risk be diversified away by investing in both United Bankshares and Washington Trust 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 Washington Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Bankshares and Washington Trust Bancorp, you can compare the effects of market volatilities on United Bankshares and Washington Trust 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 Washington Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Bankshares and Washington Trust.
Diversification Opportunities for United Bankshares and Washington Trust
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between United and Washington is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding United Bankshares and Washington Trust Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Washington Trust 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 Washington Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Washington Trust Bancorp has no effect on the direction of United Bankshares i.e., United Bankshares and Washington Trust go up and down completely randomly.
Pair Corralation between United Bankshares and Washington Trust
Given the investment horizon of 90 days United Bankshares is expected to generate 0.79 times more return on investment than Washington Trust. However, United Bankshares is 1.27 times less risky than Washington Trust. It trades about 0.01 of its potential returns per unit of risk. Washington Trust Bancorp is currently generating about -0.01 per unit of risk. If you would invest 3,619 in United Bankshares on October 14, 2024 and sell it today you would lose (45.00) from holding United Bankshares or give up 1.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Bankshares vs. Washington Trust Bancorp
Performance |
| Timeline |
| United Bankshares |
| Washington Trust Bancorp |
United Bankshares and Washington Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Bankshares and Washington Trust
The main advantage of trading using opposite United Bankshares and Washington Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Bankshares position performs unexpectedly, Washington Trust 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 Washington Trust will offset losses from the drop in Washington Trust's long position.| United Bankshares vs. Peoples Bancorp | United Bankshares vs. Eagle Bancorp | United Bankshares vs. Northrim BanCorp | United Bankshares vs. Pacific Premier Bancorp |
| Washington Trust vs. Univest Pennsylvania | Washington Trust vs. Waterstone Financial | Washington Trust vs. Mid Penn Bancorp | Washington Trust vs. ST 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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