Correlation Between First Capital and United Bankshares

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

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

Diversification Opportunities for First Capital and United Bankshares

-0.41

Correlation Coefficient

First Capital  United Bankshares

Very good diversification

The 3 months correlation between First and United is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding First Capital and United Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Bankshares and First Capital 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 First Capital 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 First Capital i.e., First Capital and United Bankshares go up and down completely randomly.

Pair Corralation between First Capital and United Bankshares

Given the investment horizon of 90 days First Capital is expected to under-perform the United Bankshares. But the stock apears to be less risky and, when comparing its historical volatility, First Capital is 1.07 times less risky than United Bankshares. The stock trades about -0.06 of its potential returns per unit of risk. The United Bankshares is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,580  in United Bankshares on October 6, 2024 and sell it today you would earn a total of  152.00  from holding United Bankshares or generate 4.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

First Capital  vs.  United Bankshares

First Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

United Bankshares

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United Bankshares are ranked lower than 3 (%) 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 First Capital and United Bankshares

The main advantage of trading using opposite First Capital and United Bankshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Capital 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 First Capital 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.