Correlation Between Northview Residential and VersaBank

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

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

Diversification Opportunities for Northview Residential and VersaBank

-0.18

Correlation Coefficient

Northview Residential  VersaBank

Good diversification

The 3 months correlation between Northview and VersaBank is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Northview Residential REIT and VersaBank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VersaBank and Northview Residential 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 Northview Residential REIT 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 Northview Residential i.e., Northview Residential and VersaBank go up and down completely randomly.

Pair Corralation between Northview Residential and VersaBank

Assuming the 90 days trading horizon Northview Residential REIT is expected to generate 0.45 times more return on investment than VersaBank. However, Northview Residential REIT is 2.24 times less risky than VersaBank. It trades about -0.04 of its potential returns per unit of risk. VersaBank is currently generating about -0.2 per unit of risk. If you would invest  1,535  in Northview Residential REIT on December 30, 2024 and sell it today you would lose (47.00) from holding Northview Residential REIT or give up 3.06% of portfolio value over 90 days.

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

Northview Residential REIT  vs.  VersaBank

Northview Residential

Risk-Adjusted Performance

Very Weak

Over the last 90 days Northview Residential REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Northview Residential is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

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 Northview Residential and VersaBank

The main advantage of trading using opposite Northview Residential and VersaBank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northview Residential 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 Northview Residential REIT 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.