Correlation Between St Galler and VP Bank

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

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

Diversification Opportunities for St Galler and VP Bank

0.67

Correlation Coefficient

St Galler  VP Bank

Poor diversification

The 3 months correlation between SGKN and VPBN is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding St Galler Kantonalbank and VP Bank AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VP Bank AG and St Galler 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 St Galler Kantonalbank are associated (or correlated) with VP Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VP Bank AG has no effect on the direction of St Galler i.e., St Galler and VP Bank go up and down completely randomly.

Pair Corralation between St Galler and VP Bank

Assuming the 90 days trading horizon St Galler is expected to generate 1.73 times less return on investment than VP Bank. But when comparing it to its historical volatility, St Galler Kantonalbank is 2.09 times less risky than VP Bank. It trades about 0.08 of its potential returns per unit of risk. VP Bank AG is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  7,260  in VP Bank AG on September 26, 2024 and sell it today you would earn a total of  420.00  from holding VP Bank AG or generate 5.79% return on investment over 90 days.

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

St Galler Kantonalbank  vs.  VP Bank AG

St Galler Kantonalbank

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in St Galler Kantonalbank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, St Galler is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

VP Bank AG

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in VP Bank AG are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, VP Bank is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with St Galler and VP Bank

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

The idea behind St Galler Kantonalbank and VP Bank AG 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .