Correlation Between Provident Financial and United Bankshares

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

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

Diversification Opportunities for Provident Financial and United Bankshares

0.98

Correlation Coefficient

Provident Financial  United Bankshares

Almost no diversification

The 3 months correlation between Provident and United is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Provident Financial Services and United Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Bankshares and Provident Financial 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 Provident Financial Services 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 Provident Financial i.e., Provident Financial and United Bankshares go up and down completely randomly.

Pair Corralation between Provident Financial and United Bankshares

Considering the 90-day investment horizon Provident Financial Services is expected to generate 1.12 times more return on investment than United Bankshares. However, Provident Financial is 1.12 times more volatile than United Bankshares. It trades about 0.02 of its potential returns per unit of risk. United Bankshares is currently generating about 0.01 per unit of risk. If you would invest  1,883  in Provident Financial Services on October 6, 2024 and sell it today you would earn a total of  10.00  from holding Provident Financial Services or generate 0.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	97.62%
Values	Daily Returns

Provident Financial Services  vs.  United Bankshares

Provident Financial

Risk-Adjusted Performance

4 of 100

Insignificant

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

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 Provident Financial and United Bankshares

The main advantage of trading using opposite Provident Financial and United Bankshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Provident Financial 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 Provident Financial Services 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.