Correlation Between Cembra Money and VP Bank

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

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

Diversification Opportunities for Cembra Money and VP Bank

0.72

Correlation Coefficient

Cembra Money  VP Bank

Poor diversification

The 3 months correlation between Cembra and VPBN is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Cembra Money Bank and VP Bank AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VP Bank AG and Cembra Money 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 Cembra Money Bank are associated (or correlated) with VP Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VP Bank AG has no effect on the direction of Cembra Money i.e., Cembra Money and VP Bank go up and down completely randomly.

Pair Corralation between Cembra Money and VP Bank

Assuming the 90 days trading horizon Cembra Money Bank is expected to generate 0.77 times more return on investment than VP Bank. However, Cembra Money Bank is 1.3 times less risky than VP Bank. It trades about 0.33 of its potential returns per unit of risk. VP Bank AG is currently generating about 0.11 per unit of risk. If you would invest  8,200  in Cembra Money Bank on December 29, 2024 and sell it today you would earn a total of  1,785  from holding Cembra Money Bank or generate 21.77% return on investment over 90 days.

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

Cembra Money Bank  vs.  VP Bank AG

Cembra Money Bank

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Cembra Money Bank are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Cembra Money showed solid returns over the last few months and may actually be approaching a breakup point.

VP Bank AG

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VP Bank AG are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, VP Bank may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Cembra Money and VP Bank

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

The idea behind Cembra Money Bank and VP Bank AG 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.