Correlation Between Union Bankshares and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Union Bankshares and Dow Jones 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 Union Bankshares and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Union Bankshares and Dow Jones Industrial, you can compare the effects of market volatilities on Union Bankshares and Dow Jones 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 Union Bankshares with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Union Bankshares and Dow Jones.
Diversification Opportunities for Union Bankshares and Dow Jones
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Union and Dow is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Union Bankshares and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Union 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 Union Bankshares are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Union Bankshares i.e., Union Bankshares and Dow Jones go up and down completely randomly.
Pair Corralation between Union Bankshares and Dow Jones
Considering the 90-day investment horizon Union Bankshares is expected to generate 3.54 times more return on investment than Dow Jones. However, Union Bankshares is 3.54 times more volatile than Dow Jones Industrial. It trades about 0.07 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.12 per unit of risk. If you would invest 2,094 in Union Bankshares on August 31, 2024 and sell it today you would earn a total of 1,346 from holding Union Bankshares or generate 64.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Union Bankshares vs. Dow Jones Industrial
Performance |
| Timeline |
Union Bankshares and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Union Bankshares
Pair trading matchups for Union Bankshares
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Union Bankshares and Dow Jones
The main advantage of trading using opposite Union Bankshares and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Union Bankshares position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Union Bankshares vs. Home Bancorp | Union Bankshares vs. Rhinebeck Bancorp | Union Bankshares vs. LINKBANCORP | Union Bankshares vs. Magyar Bancorp |
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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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