Correlation Between Embassy Bancorp and Valley National

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

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

Diversification Opportunities for Embassy Bancorp and Valley National

0.45

Correlation Coefficient

Embassy Bancorp  Valley National

Very weak diversification

The 3 months correlation between Embassy and Valley is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Embassy Bancorp and Valley National Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valley National Bancorp and Embassy 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 Embassy Bancorp are associated (or correlated) with Valley National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valley National Bancorp has no effect on the direction of Embassy Bancorp i.e., Embassy Bancorp and Valley National go up and down completely randomly.

Pair Corralation between Embassy Bancorp and Valley National

Given the investment horizon of 90 days Embassy Bancorp is expected to generate 0.78 times more return on investment than Valley National. However, Embassy Bancorp is 1.28 times less risky than Valley National. It trades about 0.2 of its potential returns per unit of risk. Valley National Bancorp is currently generating about 0.07 per unit of risk. If you would invest  1,549  in Embassy Bancorp on September 13, 2024 and sell it today you would earn a total of  101.00  from holding Embassy Bancorp or generate 6.52% return on investment over 90 days.

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

Embassy Bancorp  vs.  Valley National Bancorp

Embassy Bancorp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Embassy Bancorp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Embassy Bancorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Valley National Bancorp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Valley National Bancorp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Valley National is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Embassy Bancorp and Valley National

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

The idea behind Embassy Bancorp and Valley National Bancorp 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.