Correlation Between Bank First and BankUnited

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

Diversification Opportunities for Bank First and BankUnited

-0.3
  Correlation Coefficient

Very good diversification

The 3 months correlation between Bank First and BankUnited is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Bank First National and BankUnited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BankUnited and Bank First 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 Bank First National are associated (or correlated) with BankUnited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BankUnited has no effect on the direction of Bank First i.e., Bank First and BankUnited go up and down completely randomly.

Pair Corralation between Bank First and BankUnited

Considering the 90-day investment horizon Bank First National is expected to generate 0.54 times more return on investment than BankUnited. However, Bank First National is 1.86 times less risky than BankUnited. It trades about 0.08 of its potential returns per unit of risk. BankUnited is currently generating about -0.07 per unit of risk. If you would invest  7,055  in Bank First National on April 6, 2022 and sell it today you would earn a total of  641.00  from holding Bank First National or generate 9.09% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Bank First National  vs.  BankUnited

 Performance (%) 
      Timeline 
Bank First National 
Bank First Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Bank First National are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Bank First may actually be approaching a critical reversion point that can send shares even higher in August 2022.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0115
Payout Ratio
0.2
Last Split Factor
2:1
Forward Annual Dividend Rate
0.88
Dividend Date
2022-07-06
Ex Dividend Date
2022-06-21
Last Split Date
2002-10-21

Bank First Price Channel

BankUnited 
BankUnited Performance
0 of 100
Over the last 90 days BankUnited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward-looking signals remain comparatively stable which may send shares a bit higher in August 2022. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0276
Payout Ratio
0.25
Forward Annual Dividend Rate
1.0
Dividend Date
2022-07-29
Ex Dividend Date
2022-07-13

BankUnited Price Channel

Bank First and BankUnited Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Bank First and BankUnited

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

Bank First National

Pair trading matchups for Bank First

Microsoft Corp vs. Bank First
Vmware vs. Bank First
Twitter vs. Bank First
Otp Bank vs. Bank First
Definitive Healthcare vs. Bank First
Dupont Denemours vs. Bank First
Walker Dunlop vs. Bank First
Ultrashort MSCI vs. Bank First
Visa vs. Bank First
Ollies Bargain vs. Bank First
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Bank First as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Bank First's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Bank First's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Bank First National.
The idea behind Bank First National and BankUnited 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.

BankUnited

Pair trading matchups for BankUnited

Definitive Healthcare vs. BankUnited
Kimball Electrnc vs. BankUnited
Walker Dunlop vs. BankUnited
Twitter vs. BankUnited
Microsoft Corp vs. BankUnited
Cansino Biologics vs. BankUnited
Kura Oncology vs. BankUnited
Dupont Denemours vs. BankUnited
Citigroup vs. BankUnited
Ollies Bargain vs. BankUnited
Otp Bank vs. BankUnited
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against BankUnited as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. BankUnited's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, BankUnited's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to BankUnited.
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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