Correlation Between Bank of Utica and Washington Business

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

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

Diversification Opportunities for Bank of Utica and Washington Business

0.81

Correlation Coefficient

Bank of Utica  Washington Business

Very poor diversification

The 3 months correlation between Bank and Washington is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Utica and Washington Business Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Washington Business Bank and Bank of Utica 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 Bank of Utica are associated (or correlated) with Washington Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Washington Business Bank has no effect on the direction of Bank of Utica i.e., Bank of Utica and Washington Business go up and down completely randomly.

Pair Corralation between Bank of Utica and Washington Business

Given the investment horizon of 90 days Bank of Utica is expected to under-perform the Washington Business. In addition to that, Bank of Utica is 2.37 times more volatile than Washington Business Bank. It trades about -0.01 of its total potential returns per unit of risk. Washington Business Bank is currently generating about 0.2 per unit of volatility. If you would invest  3,007  in Washington Business Bank on September 2, 2024 and sell it today you would earn a total of  593.00  from holding Washington Business Bank or generate 19.72% return on investment over 90 days.

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

Bank of Utica  vs.  Washington Business Bank

Bank of Utica

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Utica are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Bank of Utica unveiled solid returns over the last few months and may actually be approaching a breakup point.

Washington Business Bank

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Washington Business Bank are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Washington Business may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bank of Utica and Washington Business

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

The idea behind Bank of Utica and Washington Business 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.