Correlation Between Psychemedics and United Bancshares

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

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

Diversification Opportunities for Psychemedics and United Bancshares

-0.07

Correlation Coefficient

Psychemedics  United Bancshares

Good diversification

The 3 months correlation between Psychemedics and United is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Psychemedics and United Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Bancshares and Psychemedics 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 Psychemedics are associated (or correlated) with United Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Bancshares has no effect on the direction of Psychemedics i.e., Psychemedics and United Bancshares go up and down completely randomly.

Pair Corralation between Psychemedics and United Bancshares

If you would invest  230.00  in Psychemedics on September 1, 2024 and sell it today you would earn a total of  3.00  from holding Psychemedics or generate 1.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

Psychemedics  vs.  United Bancshares

Psychemedics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Psychemedics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Psychemedics is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

United Bancshares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, United Bancshares is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Psychemedics and United Bancshares

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

The idea behind Psychemedics and United Bancshares 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.