Correlation Between Scandium Canada and VersaBank

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

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

Diversification Opportunities for Scandium Canada and VersaBank

-0.43

Correlation Coefficient

Scandium Canada  VersaBank

Very good diversification

The 3 months correlation between Scandium and VersaBank is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Scandium Canada and VersaBank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VersaBank and Scandium Canada 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 Scandium Canada 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 Scandium Canada i.e., Scandium Canada and VersaBank go up and down completely randomly.

Pair Corralation between Scandium Canada and VersaBank

Assuming the 90 days horizon Scandium Canada is expected to generate 6.75 times more return on investment than VersaBank. However, Scandium Canada is 6.75 times more volatile than VersaBank. It trades about 0.06 of its potential returns per unit of risk. VersaBank is currently generating about 0.19 per unit of risk. If you would invest  2.50  in Scandium Canada on September 12, 2024 and sell it today you would lose (0.50) from holding Scandium Canada or give up 20.0% of portfolio value over 90 days.

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

Scandium Canada  vs.  VersaBank

Scandium Canada

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Scandium Canada are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Scandium Canada showed solid returns over the last few months and may actually be approaching a breakup point.

VersaBank

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VersaBank are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, VersaBank displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Scandium Canada and VersaBank

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

Check out your portfolio center.

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.