Correlation Between Two Rivers and Virginia National

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

By analyzing existing cross correlation between Two Rivers Financial and Virginia National Bankshares, you can compare the effects of market volatilities on Two Rivers and Virginia National 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 Two Rivers with a short position of Virginia National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Two Rivers and Virginia National.

Diversification Opportunities for Two Rivers and Virginia National

-0.61

Correlation Coefficient

Two Rivers  Virginia National

Excellent diversification

The 3 months correlation between Two and Virginia is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Two Rivers Financial and Virginia National Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virginia National and Two Rivers 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 Two Rivers Financial are associated (or correlated) with Virginia National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virginia National has no effect on the direction of Two Rivers i.e., Two Rivers and Virginia National go up and down completely randomly.

Pair Corralation between Two Rivers and Virginia National

Given the investment horizon of 90 days Two Rivers Financial is expected to generate 0.3 times more return on investment than Virginia National. However, Two Rivers Financial is 3.37 times less risky than Virginia National. It trades about 0.03 of its potential returns per unit of risk. Virginia National Bankshares is currently generating about -0.03 per unit of risk. If you would invest  3,600  in Two Rivers Financial on December 27, 2024 and sell it today you would earn a total of  25.00  from holding Two Rivers Financial or generate 0.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Two Rivers Financial  vs.  Virginia National Bankshares

Two Rivers Financial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Two Rivers Financial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Two Rivers is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Virginia National

Risk-Adjusted Performance

Very Weak

Over the last 90 days Virginia National Bankshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, Virginia National is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Two Rivers and Virginia National

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

The idea behind Two Rivers Financial and Virginia National Bankshares 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.