Correlation Between BankUnited and Dime Community

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

By analyzing existing cross correlation between BankUnited and Dime Community Bancshares, you can compare the effects of market volatilities on BankUnited and Dime Community 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 Dime Community. Check out your portfolio center. Please also check ongoing floating volatility patterns of BankUnited and Dime Community.

Diversification Opportunities for BankUnited and Dime Community

0.85

Correlation Coefficient

BankUnited  Dime Community

Very poor diversification

The 3 months correlation between BankUnited and Dime is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding BankUnited and Dime Community Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dime Community Bancshares 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 Dime Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dime Community Bancshares has no effect on the direction of BankUnited i.e., BankUnited and Dime Community go up and down completely randomly.

Pair Corralation between BankUnited and Dime Community

Considering the 90-day investment horizon BankUnited is expected to under-perform the Dime Community. But the stock apears to be less risky and, when comparing its historical volatility, BankUnited is 1.02 times less risky than Dime Community. The stock trades about -0.07 of its potential returns per unit of risk. The Dime Community Bancshares is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  3,085  in Dime Community Bancshares on December 21, 2024 and sell it today you would lose (261.00) from holding Dime Community Bancshares or give up 8.46% of portfolio value over 90 days.

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

BankUnited  vs.  Dime Community Bancshares

BankUnited

Risk-Adjusted Performance

Very Weak

Over the last 90 days BankUnited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's forward-looking signals remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Dime Community Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dime Community Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with BankUnited and Dime Community

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

The idea behind BankUnited and Dime Community Bancshares 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.