Correlation Between Unity Bancorp and Psychemedics

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

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

Diversification Opportunities for Unity Bancorp and Psychemedics

0.35

Correlation Coefficient

Unity Bancorp  Psychemedics

Weak diversification

The 3 months correlation between Unity and Psychemedics is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Unity Bancorp and Psychemedics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Psychemedics 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 Psychemedics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Psychemedics has no effect on the direction of Unity Bancorp i.e., Unity Bancorp and Psychemedics go up and down completely randomly.

Pair Corralation between Unity Bancorp and Psychemedics

Given the investment horizon of 90 days Unity Bancorp is expected to generate 8.15 times more return on investment than Psychemedics. However, Unity Bancorp is 8.15 times more volatile than Psychemedics. It trades about 0.38 of its potential returns per unit of risk. Psychemedics is currently generating about 0.12 per unit of risk. If you would invest  3,276  in Unity Bancorp on August 10, 2024 and sell it today you would earn a total of  1,196  from holding Unity Bancorp or generate 36.51% return on investment over 90 days.

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

Unity Bancorp  vs.  Psychemedics

Unity Bancorp

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Unity Bancorp are ranked lower than 18 (%) 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.

Psychemedics

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Psychemedics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, Psychemedics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Unity Bancorp and Psychemedics

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

The idea behind Unity Bancorp and Psychemedics 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.