Correlation Between Union Bankshares and Psychemedics

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

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

Diversification Opportunities for Union Bankshares and Psychemedics

0.0

Correlation Coefficient

Union Bankshares  Psychemedics

Pay attention - limited upside

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

Pair Corralation between Union Bankshares and Psychemedics

If you would invest  2,836  in Union Bankshares on December 29, 2024 and sell it today you would earn a total of  336.00  from holding Union Bankshares or generate 11.85% return on investment over 90 days.

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

Union Bankshares  vs.  Psychemedics

Union Bankshares

Risk-Adjusted Performance

OK

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

Psychemedics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Psychemedics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Psychemedics is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Union Bankshares and Psychemedics

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

The idea behind Union Bankshares and Psychemedics 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.