Correlation Between Village Bank and Prime Meridian

Can any of the company-specific risk be diversified away by investing in both Village Bank and Prime Meridian 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 Prime Meridian 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 Prime Meridian Holding, you can compare the effects of market volatilities on Village Bank and Prime Meridian 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 Prime Meridian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Village Bank and Prime Meridian.

Diversification Opportunities for Village Bank and Prime Meridian

0.46

Correlation Coefficient

Village Bank  Prime Meridian

Very weak diversification

The 3 months correlation between Village and Prime is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Village Bank and and Prime Meridian Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prime Meridian Holding 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 Prime Meridian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prime Meridian Holding has no effect on the direction of Village Bank i.e., Village Bank and Prime Meridian go up and down completely randomly.

Pair Corralation between Village Bank and Prime Meridian

Given the investment horizon of 90 days Village Bank and is expected to generate 48.89 times more return on investment than Prime Meridian. However, Village Bank is 48.89 times more volatile than Prime Meridian Holding. It trades about 0.08 of its potential returns per unit of risk. Prime Meridian Holding is currently generating about 0.07 per unit of risk. If you would invest  3,853  in Village Bank and on August 31, 2024 and sell it today you would earn a total of  3,927  from holding Village Bank and or generate 101.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	88.75%
Values	Daily Returns

Village Bank and  vs.  Prime Meridian Holding

Village Bank

Risk-Adjusted Performance

0 of 100

OK

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 weak technical and fundamental indicators, Village Bank exhibited solid returns over the last few months and may actually be approaching a breakup point.

Prime Meridian Holding

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prime Meridian Holding are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical indicators, Prime Meridian reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Village Bank and Prime Meridian

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

The idea behind Village Bank and and Prime Meridian Holding 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.