Correlation Between STERLING FINANCIAL and UNITY BANK

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

By analyzing existing cross correlation between STERLING FINANCIAL HOLDINGS and UNITY BANK PLC, you can compare the effects of market volatilities on STERLING FINANCIAL and UNITY 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 STERLING FINANCIAL with a short position of UNITY BANK. Check out your portfolio center. Please also check ongoing floating volatility patterns of STERLING FINANCIAL and UNITY BANK.

Diversification Opportunities for STERLING FINANCIAL and UNITY BANK

0.0

Correlation Coefficient

STERLING FINANCIAL  UNITY BANK

Pay attention - limited upside

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

Pair Corralation between STERLING FINANCIAL and UNITY BANK

If you would invest  480.00  in STERLING FINANCIAL HOLDINGS on October 25, 2024 and sell it today you would earn a total of  75.00  from holding STERLING FINANCIAL HOLDINGS or generate 15.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

STERLING FINANCIAL HOLDINGS  vs.  UNITY BANK PLC

STERLING FINANCIAL

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in STERLING FINANCIAL HOLDINGS are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, STERLING FINANCIAL displayed solid returns over the last few months and may actually be approaching a breakup point.

UNITY BANK PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UNITY BANK PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, UNITY BANK is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with STERLING FINANCIAL and UNITY BANK

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

The idea behind STERLING FINANCIAL HOLDINGS and UNITY BANK PLC 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.