Correlation Between First Foundation and BankUnited

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

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

Diversification Opportunities for First Foundation and BankUnited

0.53

Correlation Coefficient

First Foundation  BankUnited

Very weak diversification

The 3 months correlation between First and BankUnited is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding First Foundation and BankUnited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BankUnited and First Foundation 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 Foundation 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 First Foundation i.e., First Foundation and BankUnited go up and down completely randomly.

Pair Corralation between First Foundation and BankUnited

Given the investment horizon of 90 days First Foundation is expected to under-perform the BankUnited. In addition to that, First Foundation is 1.52 times more volatile than BankUnited. It trades about -0.1 of its total potential returns per unit of risk. BankUnited is currently generating about -0.07 per unit of volatility. If you would invest  3,808  in BankUnited on December 21, 2024 and sell it today you would lose (340.00) from holding BankUnited or give up 8.93% of portfolio value over 90 days.

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

First Foundation  vs.  BankUnited

First Foundation

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Foundation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing 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 First Foundation and BankUnited

The main advantage of trading using opposite First Foundation and BankUnited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Foundation 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 First Foundation 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.