Correlation Between Virginia National and Affinity Bancshares

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

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

Diversification Opportunities for Virginia National and Affinity Bancshares

0.59

Correlation Coefficient

Virginia National  Affinity Bancshares

Very weak diversification

The 3 months correlation between Virginia and Affinity is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Virginia National Bankshares and Affinity Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Affinity Bancshares and Virginia National 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 Virginia National Bankshares are associated (or correlated) with Affinity Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Affinity Bancshares has no effect on the direction of Virginia National i.e., Virginia National and Affinity Bancshares go up and down completely randomly.

Pair Corralation between Virginia National and Affinity Bancshares

Given the investment horizon of 90 days Virginia National Bankshares is expected to generate 0.59 times more return on investment than Affinity Bancshares. However, Virginia National Bankshares is 1.69 times less risky than Affinity Bancshares. It trades about -0.02 of its potential returns per unit of risk. Affinity Bancshares is currently generating about -0.06 per unit of risk. If you would invest  3,756  in Virginia National Bankshares on December 30, 2024 and sell it today you would lose (101.00) from holding Virginia National Bankshares or give up 2.69% of portfolio value over 90 days.

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

Virginia National Bankshares  vs.  Affinity Bancshares

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.

Affinity Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Affinity Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental drivers remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Virginia National and Affinity Bancshares

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

The idea behind Virginia National Bankshares and Affinity Bancshares 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 CEOs Directory module to screen CEOs from public companies around the world.