Correlation Between Bank of San Francisco and Village Bank

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

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

Diversification Opportunities for Bank of San Francisco and Village Bank

-0.15

Correlation Coefficient

Bank of San Francisco  Village Bank

Good diversification

The 3 months correlation between Bank and Village is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Bank of San and Village Bank and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Village Bank and Bank of San Francisco 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 Bank of San are associated (or correlated) with Village Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Village Bank has no effect on the direction of Bank of San Francisco i.e., Bank of San Francisco and Village Bank go up and down completely randomly.

Pair Corralation between Bank of San Francisco and Village Bank

Given the investment horizon of 90 days Bank of San Francisco is expected to generate 6.7 times less return on investment than Village Bank. In addition to that, Bank of San Francisco is 3.93 times more volatile than Village Bank and. It trades about 0.01 of its total potential returns per unit of risk. Village Bank and is currently generating about 0.18 per unit of volatility. If you would invest  7,767  in Village Bank and on December 27, 2024 and sell it today you would earn a total of  243.00  from holding Village Bank and or generate 3.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	83.61%
Values	Daily Returns

Bank of San  vs.  Village Bank and

Bank of San Francisco

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank of San has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Bank of San Francisco is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Village Bank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Village Bank and are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Village Bank is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Bank of San Francisco and Village Bank

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

The idea behind Bank of San and Village Bank and 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.