Correlation Between Union Bankshares and Unity Bancorp

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

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

Diversification Opportunities for Union Bankshares and Unity Bancorp

0.91

Correlation Coefficient

Union Bankshares  Unity Bancorp

Almost no diversification

The 3 months correlation between Union and Unity is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Union Bankshares and Unity Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unity Bancorp 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 Unity Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unity Bancorp has no effect on the direction of Union Bankshares i.e., Union Bankshares and Unity Bancorp go up and down completely randomly.

Pair Corralation between Union Bankshares and Unity Bancorp

Considering the 90-day investment horizon Union Bankshares is expected to generate 0.88 times more return on investment than Unity Bancorp. However, Union Bankshares is 1.13 times less risky than Unity Bancorp. It trades about 0.22 of its potential returns per unit of risk. Unity Bancorp is currently generating about 0.19 per unit of risk. If you would invest  2,635  in Union Bankshares on September 3, 2024 and sell it today you would earn a total of  967.00  from holding Union Bankshares or generate 36.7% return on investment over 90 days.

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

Union Bankshares  vs.  Unity Bancorp

Union Bankshares

Risk-Adjusted Performance

17 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Union Bankshares are ranked lower than 17 (%) 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.

Unity Bancorp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Unity Bancorp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Unity Bancorp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Union Bankshares and Unity Bancorp

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

The idea behind Union Bankshares and Unity Bancorp 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..