Correlation Between Unity Bancorp and United Bancshares

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

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

Diversification Opportunities for Unity Bancorp and United Bancshares

0.39

Correlation Coefficient

Unity Bancorp  United Bancshares

Weak diversification

The 3 months correlation between Unity and United is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Unity Bancorp and United Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Bancshares and Unity Bancorp 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 Unity Bancorp are associated (or correlated) with United Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Bancshares has no effect on the direction of Unity Bancorp i.e., Unity Bancorp and United Bancshares go up and down completely randomly.

Pair Corralation between Unity Bancorp and United Bancshares

If you would invest  3,380  in Unity Bancorp on August 30, 2024 and sell it today you would earn a total of  1,185  from holding Unity Bancorp or generate 35.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.59%
Values	Daily Returns

Unity Bancorp  vs.  United Bancshares

Unity Bancorp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Unity Bancorp are ranked lower than 14 (%) 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.

United Bancshares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, United Bancshares is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Unity Bancorp and United Bancshares

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

The idea behind Unity Bancorp and United Bancshares 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.

Check out your portfolio center.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.