Correlation Between BankUnited and Affinity Bancshares

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

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

Diversification Opportunities for BankUnited and Affinity Bancshares

0.31

Correlation Coefficient

BankUnited  Affinity Bancshares

Weak diversification

The 3 months correlation between BankUnited and Affinity is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding BankUnited and Affinity Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Affinity Bancshares and BankUnited 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 BankUnited are associated (or correlated) with Affinity Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Affinity Bancshares has no effect on the direction of BankUnited i.e., BankUnited and Affinity Bancshares go up and down completely randomly.

Pair Corralation between BankUnited and Affinity Bancshares

Considering the 90-day investment horizon BankUnited is expected to generate 19.85 times less return on investment than Affinity Bancshares. In addition to that, BankUnited is 1.33 times more volatile than Affinity Bancshares. It trades about 0.0 of its total potential returns per unit of risk. Affinity Bancshares is currently generating about 0.04 per unit of volatility. If you would invest  1,452  in Affinity Bancshares on March 15, 2024 and sell it today you would earn a total of  614.00  from holding Affinity Bancshares or generate 42.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.19%
Values	Daily Returns

BankUnited  vs.  Affinity Bancshares

BankUnited

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BankUnited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting forward-looking signals, BankUnited may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Affinity Bancshares

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Affinity Bancshares are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting fundamental drivers, Affinity Bancshares demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BankUnited and Affinity Bancshares

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

The idea behind BankUnited and Affinity 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.