Correlation Between United Bankshares and Provident Financial

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

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

Diversification Opportunities for United Bankshares and Provident Financial

0.98

Correlation Coefficient

United Bankshares  Provident Financial

Almost no diversification

The 3 months correlation between United and Provident is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding United Bankshares and Provident Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Provident Financial and United Bankshares 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 Bankshares are associated (or correlated) with Provident Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Provident Financial has no effect on the direction of United Bankshares i.e., United Bankshares and Provident Financial go up and down completely randomly.

Pair Corralation between United Bankshares and Provident Financial

Given the investment horizon of 90 days United Bankshares is expected to generate 1.51 times less return on investment than Provident Financial. But when comparing it to its historical volatility, United Bankshares is 1.16 times less risky than Provident Financial. It trades about 0.04 of its potential returns per unit of risk. Provident Financial Services is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,773  in Provident Financial Services on October 6, 2024 and sell it today you would earn a total of  120.00  from holding Provident Financial Services or generate 6.77% return on investment over 90 days.

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

United Bankshares  vs.  Provident Financial Services

United Bankshares

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United Bankshares are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, United Bankshares is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Provident Financial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Provident Financial Services are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, Provident Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with United Bankshares and Provident Financial

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

The idea behind United Bankshares and Provident Financial Services 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.