Correlation Between United Security and Bank of the Philippine Is

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

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

Diversification Opportunities for United Security and Bank of the Philippine Is

0.09

Correlation Coefficient

United Security  Bank of the Philippine Is

Significant diversification

The 3 months correlation between United and Bank is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding United Security Bancshares and Bank of the in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of the Philippine Is and United Security 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 Security Bancshares are associated (or correlated) with Bank of the Philippine Is. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of the Philippine Is has no effect on the direction of United Security i.e., United Security and Bank of the Philippine Is go up and down completely randomly.

Pair Corralation between United Security and Bank of the Philippine Is

Given the investment horizon of 90 days United Security Bancshares is expected to under-perform the Bank of the Philippine Is. But the stock apears to be less risky and, when comparing its historical volatility, United Security Bancshares is 2.59 times less risky than Bank of the Philippine Is. The stock trades about -0.09 of its potential returns per unit of risk. The Bank of the is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  4,275  in Bank of the on November 28, 2024 and sell it today you would earn a total of  430.00  from holding Bank of the or generate 10.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

United Security Bancshares  vs.  Bank of the

United Security Banc

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Security Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, United Security is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Bank of the Philippine Is

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of the are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Bank of the Philippine Is may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with United Security and Bank of the Philippine Is

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

The idea behind United Security Bancshares and Bank of the 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.