Correlation Between Banco De and MVB Financial

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

By analyzing existing cross correlation between Banco De Chile and MVB Financial Corp, you can compare the effects of market volatilities on Banco De and MVB 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 Banco De with a short position of MVB Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco De and MVB Financial.

Diversification Opportunities for Banco De and MVB Financial

-0.59

Correlation Coefficient

Banco De  MVB Financial

Excellent diversification

The 3 months correlation between Banco and MVB is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Banco De Chile and MVB Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MVB Financial Corp and Banco De 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 Banco De Chile are associated (or correlated) with MVB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MVB Financial Corp has no effect on the direction of Banco De i.e., Banco De and MVB Financial go up and down completely randomly.

Pair Corralation between Banco De and MVB Financial

Considering the 90-day investment horizon Banco De Chile is expected to under-perform the MVB Financial. But the stock apears to be less risky and, when comparing its historical volatility, Banco De Chile is 4.04 times less risky than MVB Financial. The stock trades about -0.05 of its potential returns per unit of risk. The MVB Financial Corp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,874  in MVB Financial Corp on September 5, 2024 and sell it today you would earn a total of  285.00  from holding MVB Financial Corp or generate 15.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Banco De Chile  vs.  MVB Financial Corp

Banco De Chile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco De Chile has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

MVB Financial Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MVB Financial Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady fundamental drivers, MVB Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Banco De and MVB Financial

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

The idea behind Banco De Chile and MVB Financial Corp 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.