Correlation Between VersaBank and CullenFrost Bankers

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Can any of the company-specific risk be diversified away by investing in both VersaBank and CullenFrost Bankers 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 CullenFrost Bankers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VersaBank and CullenFrost Bankers, you can compare the effects of market volatilities on VersaBank and CullenFrost Bankers 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 CullenFrost Bankers. Check out your portfolio center. Please also check ongoing floating volatility patterns of VersaBank and CullenFrost Bankers.

Diversification Opportunities for VersaBank and CullenFrost Bankers

-0.83
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between VersaBank and CullenFrost is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding VersaBank and CullenFrost Bankers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CullenFrost Bankers 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 CullenFrost Bankers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CullenFrost Bankers has no effect on the direction of VersaBank i.e., VersaBank and CullenFrost Bankers go up and down completely randomly.

Pair Corralation between VersaBank and CullenFrost Bankers

Given the investment horizon of 90 days VersaBank is expected to generate 2.39 times more return on investment than CullenFrost Bankers. However, VersaBank is 2.39 times more volatile than CullenFrost Bankers. It trades about 0.2 of its potential returns per unit of risk. CullenFrost Bankers is currently generating about -0.13 per unit of risk. If you would invest  1,334  in VersaBank on September 4, 2024 and sell it today you would earn a total of  398.00  from holding VersaBank or generate 29.84% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

VersaBank  vs.  CullenFrost Bankers

 Performance 
       Timeline  
VersaBank 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in VersaBank are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, VersaBank disclosed solid returns over the last few months and may actually be approaching a breakup point.
CullenFrost Bankers 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days CullenFrost Bankers has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Preferred Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

VersaBank and CullenFrost Bankers Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with VersaBank and CullenFrost Bankers

The main advantage of trading using opposite VersaBank and CullenFrost Bankers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VersaBank position performs unexpectedly, CullenFrost Bankers 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 CullenFrost Bankers will offset losses from the drop in CullenFrost Bankers' long position.
The idea behind VersaBank and CullenFrost Bankers 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.

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