Correlation Between United Community and Home BancShares

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

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

Diversification Opportunities for United Community and Home BancShares

-0.3

Correlation Coefficient

United Community  Home BancShares

Very good diversification

The 3 months correlation between United and Home is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding United Community Banks and Home BancShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home BancShares and United Community 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 Community Banks are associated (or correlated) with Home BancShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home BancShares has no effect on the direction of United Community i.e., United Community and Home BancShares go up and down completely randomly.

Pair Corralation between United Community and Home BancShares

If you would invest  2,851  in Home BancShares on October 25, 2024 and sell it today you would earn a total of  165.50  from holding Home BancShares or generate 5.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

United Community Banks  vs.  Home BancShares

United Community Banks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Community Banks has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, United Community is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Home BancShares

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Home BancShares are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady primary indicators, Home BancShares sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Community and Home BancShares

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

The idea behind United Community Banks and Home BancShares 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.