Correlation Between Veritex Holdings and VersaBank

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

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

Diversification Opportunities for Veritex Holdings and VersaBank

0.86

Correlation Coefficient

Veritex Holdings  VersaBank

Very poor diversification

The 3 months correlation between Veritex and VersaBank is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Veritex Holdings and VersaBank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VersaBank and Veritex Holdings 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 Veritex Holdings are associated (or correlated) with VersaBank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VersaBank has no effect on the direction of Veritex Holdings i.e., Veritex Holdings and VersaBank go up and down completely randomly.

Pair Corralation between Veritex Holdings and VersaBank

Given the investment horizon of 90 days Veritex Holdings is expected to generate 0.62 times more return on investment than VersaBank. However, Veritex Holdings is 1.61 times less risky than VersaBank. It trades about -0.16 of its potential returns per unit of risk. VersaBank is currently generating about -0.28 per unit of risk. If you would invest  3,007  in Veritex Holdings on September 23, 2024 and sell it today you would lose (234.00) from holding Veritex Holdings or give up 7.78% of portfolio value over 90 days.

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

Veritex Holdings  vs.  VersaBank

Veritex Holdings

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Veritex Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Veritex Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

VersaBank

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Veritex Holdings and VersaBank

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

The idea behind Veritex Holdings and VersaBank 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.