Correlation Between BUA FOODS and UNITED BANK

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

By analyzing existing cross correlation between BUA FOODS PLC and UNITED BANK FOR, you can compare the effects of market volatilities on BUA FOODS and UNITED BANK 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 BUA FOODS with a short position of UNITED BANK. Check out your portfolio center. Please also check ongoing floating volatility patterns of BUA FOODS and UNITED BANK.

Diversification Opportunities for BUA FOODS and UNITED BANK

0.01

Correlation Coefficient

BUA FOODS  UNITED BANK

Significant diversification

The 3 months correlation between BUA and UNITED is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding BUA FOODS PLC and UNITED BANK FOR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITED BANK FOR and BUA FOODS 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 BUA FOODS PLC are associated (or correlated) with UNITED BANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNITED BANK FOR has no effect on the direction of BUA FOODS i.e., BUA FOODS and UNITED BANK go up and down completely randomly.

Pair Corralation between BUA FOODS and UNITED BANK

Assuming the 90 days trading horizon BUA FOODS PLC is expected to generate 1.09 times more return on investment than UNITED BANK. However, BUA FOODS is 1.09 times more volatile than UNITED BANK FOR. It trades about 0.06 of its potential returns per unit of risk. UNITED BANK FOR is currently generating about 0.03 per unit of risk. If you would invest  39,490  in BUA FOODS PLC on December 24, 2024 and sell it today you would earn a total of  2,310  from holding BUA FOODS PLC or generate 5.85% return on investment over 90 days.

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

BUA FOODS PLC  vs.  UNITED BANK FOR

BUA FOODS PLC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BUA FOODS PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, BUA FOODS may actually be approaching a critical reversion point that can send shares even higher in April 2025.

UNITED BANK FOR

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in UNITED BANK FOR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, UNITED BANK is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with BUA FOODS and UNITED BANK

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

The idea behind BUA FOODS PLC and UNITED BANK FOR 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.