Correlation Between WesBanco and Union Bankshares

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

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

Diversification Opportunities for WesBanco and Union Bankshares

0.56

Correlation Coefficient

WesBanco  Union Bankshares

Very weak diversification

The 3 months correlation between WesBanco and Union is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding WesBanco and Union Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Bankshares and WesBanco 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 WesBanco are associated (or correlated) with Union Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Bankshares has no effect on the direction of WesBanco i.e., WesBanco and Union Bankshares go up and down completely randomly.

Pair Corralation between WesBanco and Union Bankshares

Given the investment horizon of 90 days WesBanco is expected to under-perform the Union Bankshares. But the stock apears to be less risky and, when comparing its historical volatility, WesBanco is 1.2 times less risky than Union Bankshares. The stock trades about 0.0 of its potential returns per unit of risk. The Union Bankshares is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,836  in Union Bankshares on December 28, 2024 and sell it today you would earn a total of  464.00  from holding Union Bankshares or generate 16.36% return on investment over 90 days.

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

WesBanco  vs.  Union Bankshares

WesBanco

Risk-Adjusted Performance

Very Weak

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

Union Bankshares

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Union Bankshares are ranked lower than 10 (%) 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.

Pair Trading with WesBanco and Union Bankshares

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

The idea behind WesBanco and Union Bankshares 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.