Correlation Between Big Rock and VersaBank

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

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

Diversification Opportunities for Big Rock and VersaBank

0.16

Correlation Coefficient

Big Rock  VersaBank

Average diversification

The 3 months correlation between Big and VersaBank is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Big Rock Brewery and VersaBank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VersaBank and Big Rock 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 Big Rock Brewery 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 Big Rock i.e., Big Rock and VersaBank go up and down completely randomly.

Pair Corralation between Big Rock and VersaBank

Assuming the 90 days horizon Big Rock Brewery is expected to generate 2.38 times more return on investment than VersaBank. However, Big Rock is 2.38 times more volatile than VersaBank. It trades about 0.04 of its potential returns per unit of risk. VersaBank is currently generating about -0.19 per unit of risk. If you would invest  108.00  in Big Rock Brewery on December 27, 2024 and sell it today you would earn a total of  4.00  from holding Big Rock Brewery or generate 3.7% return on investment over 90 days.

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

Big Rock Brewery  vs.  VersaBank

Big Rock Brewery

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Big Rock Brewery are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Big Rock displayed solid returns over the last few months and may actually be approaching a breakup point.

VersaBank

Risk-Adjusted Performance

Very Weak

Over the last 90 days VersaBank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Big Rock and VersaBank

The main advantage of trading using opposite Big Rock and VersaBank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big Rock 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 Big Rock Brewery 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.

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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 Commodity Directory module to find actively traded commodities issued by global exchanges.