Correlation Between Invest Capital and United Bank

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

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

Diversification Opportunities for Invest Capital and United Bank

0.14

Correlation Coefficient

Invest Capital  United Bank

Average diversification

The 3 months correlation between Invest and United is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Invest Capital Investment and United Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Bank and Invest 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 Invest Capital Investment 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 has no effect on the direction of Invest Capital i.e., Invest Capital and United Bank go up and down completely randomly.

Pair Corralation between Invest Capital and United Bank

Assuming the 90 days trading horizon Invest Capital is expected to generate 3.23 times less return on investment than United Bank. In addition to that, Invest Capital is 2.13 times more volatile than United Bank. It trades about 0.03 of its total potential returns per unit of risk. United Bank is currently generating about 0.19 per unit of volatility. If you would invest  31,550  in United Bank on October 25, 2024 and sell it today you would earn a total of  7,473  from holding United Bank or generate 23.69% return on investment over 90 days.

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

Invest Capital Investment  vs.  United Bank

Invest Capital Investment

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invest Capital Investment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward indicators, Invest Capital may actually be approaching a critical reversion point that can send shares even higher in February 2025.

United Bank

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Bank are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, United Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Invest Capital and United Bank

The main advantage of trading using opposite Invest Capital and United Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invest Capital 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 Invest Capital Investment and United Bank 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.