Correlation Between VersaBank and National Bank

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

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

Diversification Opportunities for VersaBank and National Bank

0.9

Correlation Coefficient

VersaBank  National Bank

Almost no diversification

The 3 months correlation between VersaBank and National is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding VersaBank and National Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank and VersaBank 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 VersaBank are associated (or correlated) with National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank has no effect on the direction of VersaBank i.e., VersaBank and National Bank go up and down completely randomly.

Pair Corralation between VersaBank and National Bank

Assuming the 90 days trading horizon VersaBank is expected to generate 1.85 times more return on investment than National Bank. However, VersaBank is 1.85 times more volatile than National Bank of. It trades about 0.09 of its potential returns per unit of risk. National Bank of is currently generating about 0.09 per unit of risk. If you would invest  998.00  in VersaBank on September 15, 2024 and sell it today you would earn a total of  1,190  from holding VersaBank or generate 119.24% return on investment over 90 days.

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

VersaBank  vs.  National Bank of

VersaBank

Risk-Adjusted Performance

10 of 100

OK

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

National Bank

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank of are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, National Bank is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with VersaBank and National Bank

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

The idea behind VersaBank and National Bank of 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..