Correlation Between Union Bankshares and United Guardian

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Can any of the company-specific risk be diversified away by investing in both Union Bankshares and United Guardian 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 United Guardian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Union Bankshares and United Guardian, you can compare the effects of market volatilities on Union Bankshares and United Guardian 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 United Guardian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Union Bankshares and United Guardian.

Diversification Opportunities for Union Bankshares and United Guardian

-0.01
  Correlation Coefficient

Good diversification

The 3 months correlation between Union and United is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Union Bankshares and United Guardian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Guardian 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 United Guardian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Guardian has no effect on the direction of Union Bankshares i.e., Union Bankshares and United Guardian go up and down completely randomly.

Pair Corralation between Union Bankshares and United Guardian

Considering the 90-day investment horizon Union Bankshares is expected to under-perform the United Guardian. In addition to that, Union Bankshares is 1.96 times more volatile than United Guardian. It trades about -0.24 of its total potential returns per unit of risk. United Guardian is currently generating about 0.11 per unit of volatility. If you would invest  774.00  in United Guardian on February 9, 2024 and sell it today you would earn a total of  26.00  from holding United Guardian or generate 3.36% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Union Bankshares  vs.  United Guardian

 Performance 
       Timeline  
Union Bankshares 

Risk-Adjusted Performance

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Strong
Very Weak
Over the last 90 days Union Bankshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
United Guardian 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days United Guardian has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Union Bankshares and United Guardian Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Union Bankshares and United Guardian

The main advantage of trading using opposite Union Bankshares and United Guardian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Union Bankshares position performs unexpectedly, United Guardian 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 United Guardian will offset losses from the drop in United Guardian's long position.
The idea behind Union Bankshares and United Guardian 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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