Correlation Between BankUnited and CVB Financial

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

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

Diversification Opportunities for BankUnited and CVB Financial

0.95

Correlation Coefficient

BankUnited  CVB Financial

Almost no diversification

The 3 months correlation between BankUnited and CVB is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding BankUnited and CVB Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVB Financial and BankUnited 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 BankUnited are associated (or correlated) with CVB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVB Financial has no effect on the direction of BankUnited i.e., BankUnited and CVB Financial go up and down completely randomly.

Pair Corralation between BankUnited and CVB Financial

Considering the 90-day investment horizon BankUnited is expected to generate 1.01 times more return on investment than CVB Financial. However, BankUnited is 1.01 times more volatile than CVB Financial. It trades about 0.11 of its potential returns per unit of risk. CVB Financial is currently generating about 0.08 per unit of risk. If you would invest  2,515  in BankUnited on October 8, 2024 and sell it today you would earn a total of  1,359  from holding BankUnited or generate 54.04% return on investment over 90 days.

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

BankUnited  vs.  CVB Financial

BankUnited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BankUnited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady forward-looking signals, BankUnited unveiled solid returns over the last few months and may actually be approaching a breakup point.

CVB Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CVB Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting fundamental drivers, CVB Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BankUnited and CVB Financial

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

The idea behind BankUnited and CVB Financial 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.