Correlation Between Alpine Banks and United Overseas

Can any of the company-specific risk be diversified away by investing in both Alpine Banks and United Overseas 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 Alpine Banks and United Overseas into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Alpine Banks and United Overseas

0.88

Correlation Coefficient

Alpine Banks  United Overseas

Very poor diversification

The 3 months correlation between Alpine and United is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Alpine Banks of and United Overseas Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Overseas Bank and Alpine Banks 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 Alpine Banks of are associated (or correlated) with United Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Overseas Bank has no effect on the direction of Alpine Banks i.e., Alpine Banks and United Overseas go up and down completely randomly.

Pair Corralation between Alpine Banks and United Overseas

Assuming the 90 days horizon Alpine Banks is expected to generate 2.57 times less return on investment than United Overseas. But when comparing it to its historical volatility, Alpine Banks of is 1.15 times less risky than United Overseas. It trades about 0.03 of its potential returns per unit of risk. United Overseas Bank is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4,095  in United Overseas Bank on September 26, 2024 and sell it today you would earn a total of  1,236  from holding United Overseas Bank or generate 30.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Alpine Banks of  vs.  United Overseas Bank

Alpine Banks

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alpine Banks of are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady forward indicators, Alpine Banks sustained solid returns over the last few months and may actually be approaching a breakup point.

United Overseas Bank

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in United Overseas Bank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, United Overseas is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alpine Banks and United Overseas

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

The idea behind Alpine Banks of and United Overseas Bank 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.

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.