Correlation Between Capitol Federal and United Bankshares

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

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

Diversification Opportunities for Capitol Federal and United Bankshares

0.88

Correlation Coefficient

Capitol Federal  United Bankshares

Very poor diversification

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

Pair Corralation between Capitol Federal and United Bankshares

Given the investment horizon of 90 days Capitol Federal Financial is expected to under-perform the United Bankshares. In addition to that, Capitol Federal is 1.01 times more volatile than United Bankshares. It trades about -0.45 of its total potential returns per unit of risk. United Bankshares is currently generating about -0.38 per unit of volatility. If you would invest  4,156  in United Bankshares on October 5, 2024 and sell it today you would lose (452.00) from holding United Bankshares or give up 10.88% of portfolio value over 90 days.

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

Capitol Federal Financial  vs.  United Bankshares

Capitol Federal Financial

Risk-Adjusted Performance

4 of 100

Insignificant

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

United Bankshares

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in United Bankshares are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, United Bankshares is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Capitol Federal and United Bankshares

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

The idea behind Capitol Federal Financial and United Bankshares 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.