Correlation Between American Riviera and VersaBank

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

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

Diversification Opportunities for American Riviera and VersaBank

0.71

Correlation Coefficient

American Riviera  VersaBank

Poor diversification

The 3 months correlation between American and VersaBank is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding American Riviera Bank and VersaBank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VersaBank and American Riviera 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 American Riviera Bank are associated (or correlated) with VersaBank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VersaBank has no effect on the direction of American Riviera i.e., American Riviera and VersaBank go up and down completely randomly.

Pair Corralation between American Riviera and VersaBank

Given the investment horizon of 90 days American Riviera is expected to generate 2.76 times less return on investment than VersaBank. But when comparing it to its historical volatility, American Riviera Bank is 3.03 times less risky than VersaBank. It trades about 0.25 of its potential returns per unit of risk. VersaBank is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1,338  in VersaBank on September 2, 2024 and sell it today you would earn a total of  461.00  from holding VersaBank or generate 34.45% return on investment over 90 days.

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

American Riviera Bank  vs.  VersaBank

American Riviera Bank

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Riviera Bank are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, American Riviera may actually be approaching a critical reversion point that can send shares even higher in January 2025.

VersaBank

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in VersaBank are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, VersaBank disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Riviera and VersaBank

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

The idea behind American Riviera Bank and VersaBank 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.

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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.