Correlation Between Dime Community and BankUnited

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

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

Diversification Opportunities for Dime Community and BankUnited

0.85

Correlation Coefficient

Dime Community  BankUnited

Very poor diversification

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

Pair Corralation between Dime Community and BankUnited

Given the investment horizon of 90 days Dime Community Bancshares is expected to generate 1.02 times more return on investment than BankUnited. However, Dime Community is 1.02 times more volatile than BankUnited. It trades about -0.06 of its potential returns per unit of risk. BankUnited is currently generating about -0.07 per unit of risk. 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

Dime Community Bancshares  vs.  BankUnited

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.

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.

Pair Trading with Dime Community and BankUnited

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

The idea behind Dime Community Bancshares and BankUnited 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.