Correlation Between Valley National and United Overseas

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

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

Diversification Opportunities for Valley National and United Overseas

0.53

Correlation Coefficient

Valley National  United Overseas

Very weak diversification

The 3 months correlation between Valley and United is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Valley National Bancorp and United Overseas Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Overseas Bank and Valley National 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 Valley National Bancorp are associated (or correlated) with United Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Overseas Bank has no effect on the direction of Valley National i.e., Valley National and United Overseas go up and down completely randomly.

Pair Corralation between Valley National and United Overseas

Assuming the 90 days horizon Valley National is expected to generate 1.62 times less return on investment than United Overseas. But when comparing it to its historical volatility, Valley National Bancorp is 1.59 times less risky than United Overseas. It trades about 0.15 of its potential returns per unit of risk. United Overseas Bank is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  4,846  in United Overseas Bank on September 4, 2024 and sell it today you would earn a total of  599.00  from holding United Overseas Bank or generate 12.36% return on investment over 90 days.

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

Valley National Bancorp  vs.  United Overseas Bank

Valley National Bancorp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Valley National Bancorp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Valley National may actually be approaching a critical reversion point that can send shares even higher in January 2025.

United Overseas Bank

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Overseas Bank are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating technical and fundamental indicators, United Overseas may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Valley National and United Overseas

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

The idea behind Valley National Bancorp and United Overseas Bank 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.