Correlation Between Union Bank and First Financial

Can any of the company-specific risk be diversified away by investing in both Union Bank and First Financial 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 Bank and First Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Union Bank of and First Financial Holding, you can compare the effects of market volatilities on Union Bank and First Financial 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 Bank with a short position of First Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Union Bank and First Financial.

Diversification Opportunities for Union Bank and First Financial

0.76

Correlation Coefficient

Union Bank  First Financial

Poor diversification

The 3 months correlation between Union and First is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Union Bank of and First Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Financial Holding and Union Bank 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 Bank of are associated (or correlated) with First Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Financial Holding has no effect on the direction of Union Bank i.e., Union Bank and First Financial go up and down completely randomly.

Pair Corralation between Union Bank and First Financial

Assuming the 90 days trading horizon Union Bank of is expected to under-perform the First Financial. In addition to that, Union Bank is 1.19 times more volatile than First Financial Holding. It trades about -0.01 of its total potential returns per unit of risk. First Financial Holding is currently generating about 0.03 per unit of volatility. If you would invest  2,496  in First Financial Holding on October 4, 2024 and sell it today you would earn a total of  234.00  from holding First Financial Holding or generate 9.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Union Bank of  vs.  First Financial Holding

Union Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Union Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Union Bank is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

First Financial Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Financial Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, First Financial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Union Bank and First Financial

The main advantage of trading using opposite Union Bank and First Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Union Bank position performs unexpectedly, First Financial 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 Financial will offset losses from the drop in First Financial's long position.

The idea behind Union Bank of and First Financial Holding pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.