Correlation Between United Bancorporation and Community Bank

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

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

Diversification Opportunities for United Bancorporation and Community Bank

0.86

Correlation Coefficient

United Bancorporation  Community Bank

Very poor diversification

The 3 months correlation between United and Community is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding United Bancorp. of and Community Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Bank and United Bancorporation 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 United Bancorporation of are associated (or correlated) with Community Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Bank has no effect on the direction of United Bancorporation i.e., United Bancorporation and Community Bank go up and down completely randomly.

Pair Corralation between United Bancorporation and Community Bank

Given the investment horizon of 90 days United Bancorporation of is expected to generate 2.51 times more return on investment than Community Bank. However, United Bancorporation is 2.51 times more volatile than Community Bank. It trades about 0.16 of its potential returns per unit of risk. Community Bank is currently generating about 0.3 per unit of risk. If you would invest  5,025  in United Bancorporation of on September 25, 2024 and sell it today you would earn a total of  675.00  from holding United Bancorporation of or generate 13.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	46.03%
Values	Daily Returns

United Bancorp. of  vs.  Community Bank

United Bancorporation

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Bancorporation of are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, United Bancorporation sustained solid returns over the last few months and may actually be approaching a breakup point.

Community Bank

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Community Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak fundamental drivers, Community Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with United Bancorporation and Community Bank

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

The idea behind United Bancorporation of and Community 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.