Correlation Between Fifth Third and Union Bankshares

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

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

Diversification Opportunities for Fifth Third and Union Bankshares

0.82

Correlation Coefficient

Fifth Third  Union Bankshares

Very poor diversification

The 3 months correlation between Fifth and Union is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Fifth Third Bancorp and Union Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Bankshares and Fifth Third 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 Fifth Third Bancorp 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 Fifth Third i.e., Fifth Third and Union Bankshares go up and down completely randomly.

Pair Corralation between Fifth Third and Union Bankshares

Given the investment horizon of 90 days Fifth Third is expected to generate 3.39 times less return on investment than Union Bankshares. But when comparing it to its historical volatility, Fifth Third Bancorp is 1.63 times less risky than Union Bankshares. It trades about 0.09 of its potential returns per unit of risk. Union Bankshares is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,568  in Union Bankshares on September 16, 2024 and sell it today you would earn a total of  827.00  from holding Union Bankshares or generate 32.2% return on investment over 90 days.

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

Fifth Third Bancorp  vs.  Union Bankshares

Fifth Third Bancorp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fifth Third Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fifth Third may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Union Bankshares

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Union Bankshares are ranked lower than 14 (%) 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 Fifth Third and Union Bankshares

The main advantage of trading using opposite Fifth Third and Union Bankshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fifth Third 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 Fifth Third Bancorp 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.