Correlation Between Village Bank and Bank of San

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

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

Diversification Opportunities for Village Bank and Bank of San

0.25

Correlation Coefficient

Village Bank  Bank of San

Modest diversification

The 3 months correlation between Village and Bank is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Village Bank and and Bank of San in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of San and Village Bank 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 Village Bank and are associated (or correlated) with Bank of San. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of San has no effect on the direction of Village Bank i.e., Village Bank and Bank of San go up and down completely randomly.

Pair Corralation between Village Bank and Bank of San

Given the investment horizon of 90 days Village Bank and is expected to generate 271.83 times more return on investment than Bank of San. However, Village Bank is 271.83 times more volatile than Bank of San. It trades about 0.15 of its potential returns per unit of risk. Bank of San is currently generating about 0.07 per unit of risk. If you would invest  0.00  in Village Bank and on September 4, 2024 and sell it today you would earn a total of  7,750  from holding Village Bank and or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	76.19%
Values	Daily Returns

Village Bank and  vs.  Bank of San

Village Bank

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Village Bank and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather unsteady technical and fundamental indicators, Village Bank exhibited solid returns over the last few months and may actually be approaching a breakup point.

Bank of San

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Village Bank and Bank of San

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

The idea behind Village Bank and and Bank of San 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.