Correlation Between Evans Bancorp and Valley National

Can any of the company-specific risk be diversified away by investing in both Evans 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 Evans 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 Evans Bancorp and Valley National Bancorp, you can compare the effects of market volatilities on Evans 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 Evans Bancorp with a short position of Valley National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evans Bancorp and Valley National.

Diversification Opportunities for Evans Bancorp and Valley National

0.57

Correlation Coefficient

Evans Bancorp  Valley National

Very weak diversification

The 3 months correlation between Evans and Valley is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Evans 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 Evans 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 Evans 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 Evans Bancorp i.e., Evans Bancorp and Valley National go up and down completely randomly.

Pair Corralation between Evans Bancorp and Valley National

Given the investment horizon of 90 days Evans Bancorp is expected to generate 2.45 times more return on investment than Valley National. However, Evans Bancorp is 2.45 times more volatile than Valley National Bancorp. It trades about 0.1 of its potential returns per unit of risk. Valley National Bancorp is currently generating about 0.1 per unit of risk. If you would invest  4,462  in Evans Bancorp on September 12, 2024 and sell it today you would earn a total of  111.00  from holding Evans Bancorp or generate 2.49% return on investment over 90 days.

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

Evans Bancorp  vs.  Valley National Bancorp

Evans Bancorp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Evans Bancorp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, Evans Bancorp displayed solid returns over the last few months and may actually be approaching a breakup point.

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. Even with relatively invariable basic indicators, Valley National is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Evans Bancorp and Valley National

The main advantage of trading using opposite Evans Bancorp and Valley National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Evans 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 Evans 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.

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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.