Correlation Between HV Bancorp and Village Bank

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

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

Diversification Opportunities for HV Bancorp and Village Bank

0.27

Correlation Coefficient

HV Bancorp  Village Bank

Modest diversification

The 3 months correlation between HVBC and Village is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding HV Bancorp and Village Bank and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Village Bank and HV Bancorp 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 HV Bancorp 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 HV Bancorp i.e., HV Bancorp and Village Bank go up and down completely randomly.

Pair Corralation between HV Bancorp and Village Bank

If you would invest  4,697  in Village Bank and on September 5, 2024 and sell it today you would earn a total of  3,053  from holding Village Bank and or generate 65.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.18%
Values	Daily Returns

HV Bancorp  vs.  Village Bank and

HV Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HV Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, HV Bancorp is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Village Bank

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Village Bank and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather unsteady technical and fundamental indicators, Village Bank exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HV Bancorp and Village Bank

The main advantage of trading using opposite HV Bancorp and Village Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HV Bancorp 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 HV Bancorp 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.