Correlation Between Reacap Financial and United Bank

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

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

Diversification Opportunities for Reacap Financial and United Bank

0.35

Correlation Coefficient

Reacap Financial  United Bank

Weak diversification

The 3 months correlation between Reacap and United is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Reacap Financial Investments and The United Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Bank and Reacap 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 Reacap Financial Investments 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 Reacap Financial i.e., Reacap Financial and United Bank go up and down completely randomly.

Pair Corralation between Reacap Financial and United Bank

Assuming the 90 days trading horizon Reacap Financial Investments is expected to under-perform the United Bank. In addition to that, Reacap Financial is 13.35 times more volatile than The United Bank. It trades about -0.09 of its total potential returns per unit of risk. The United Bank is currently generating about 1.03 per unit of volatility. If you would invest  1,419  in The United Bank on October 21, 2024 and sell it today you would earn a total of  24.00  from holding The United Bank or generate 1.69% return on investment over 90 days.

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

Reacap Financial Investments  vs.  The United Bank

Reacap Financial Inv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reacap Financial Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

United Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The United Bank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, United Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Reacap Financial and United Bank

The main advantage of trading using opposite Reacap Financial and United Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reacap Financial 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 Reacap Financial Investments and The 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 Commodity Directory module to find actively traded commodities issued by global exchanges.