Correlation Between Psychemedics and Union Bankshares

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

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

Diversification Opportunities for Psychemedics and Union Bankshares

0.0

Correlation Coefficient

Psychemedics  Union Bankshares

Pay attention - limited upside

The 3 months correlation between Psychemedics and Union is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Psychemedics and Union Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Bankshares 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 Union Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Bankshares has no effect on the direction of Psychemedics i.e., Psychemedics and Union Bankshares go up and down completely randomly.

Pair Corralation between Psychemedics and Union Bankshares

If you would invest  2,881  in Union Bankshares on December 29, 2024 and sell it today you would earn a total of  291.00  from holding Union Bankshares or generate 10.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Psychemedics  vs.  Union Bankshares

Psychemedics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Psychemedics has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Union Bankshares

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Union Bankshares are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Union Bankshares sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Psychemedics and Union Bankshares

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

The idea behind Psychemedics and Union 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.