Correlation Between VersaBank and Columbia Financial

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

By analyzing existing cross correlation between VersaBank and Columbia Financial, you can compare the effects of market volatilities on VersaBank and Columbia Financial 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 Columbia Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of VersaBank and Columbia Financial.

Diversification Opportunities for VersaBank and Columbia Financial

0.68

Correlation Coefficient

VersaBank  Columbia Financial

Poor diversification

The 3 months correlation between VersaBank and Columbia is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding VersaBank and Columbia Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Financial 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 Columbia Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Financial has no effect on the direction of VersaBank i.e., VersaBank and Columbia Financial go up and down completely randomly.

Pair Corralation between VersaBank and Columbia Financial

Given the investment horizon of 90 days VersaBank is expected to generate 0.99 times more return on investment than Columbia Financial. However, VersaBank is 1.01 times less risky than Columbia Financial. It trades about 0.23 of its potential returns per unit of risk. Columbia Financial is currently generating about 0.03 per unit of risk. If you would invest  1,338  in VersaBank on September 3, 2024 and sell it today you would earn a total of  461.00  from holding VersaBank or generate 34.45% return on investment over 90 days.

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

VersaBank  vs.  Columbia Financial

VersaBank

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in VersaBank are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, VersaBank disclosed solid returns over the last few months and may actually be approaching a breakup point.

Columbia Financial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Financial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Columbia Financial is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with VersaBank and Columbia Financial

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

The idea behind VersaBank and Columbia Financial 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.