Correlation Between Virginia National and CNB Financial

Can any of the company-specific risk be diversified away by investing in both Virginia National and CNB Financial 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 CNB Financial 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 CNB Financial, you can compare the effects of market volatilities on Virginia National and CNB Financial 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 CNB Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virginia National and CNB Financial.

Diversification Opportunities for Virginia National and CNB Financial

0.72

Correlation Coefficient

Virginia National  CNB Financial

Poor diversification

The 3 months correlation between Virginia and CNB is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Virginia National Bankshares and CNB Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNB Financial 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 CNB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNB Financial has no effect on the direction of Virginia National i.e., Virginia National and CNB Financial go up and down completely randomly.

Pair Corralation between Virginia National and CNB Financial

Given the investment horizon of 90 days Virginia National Bankshares is expected to generate 1.32 times more return on investment than CNB Financial. However, Virginia National is 1.32 times more volatile than CNB Financial. It trades about -0.05 of its potential returns per unit of risk. CNB Financial is currently generating about -0.12 per unit of risk. If you would invest  3,813  in Virginia National Bankshares on December 19, 2024 and sell it today you would lose (233.00) from holding Virginia National Bankshares or give up 6.11% of portfolio value over 90 days.

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

Virginia National Bankshares  vs.  CNB Financial

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.

CNB Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days CNB Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Virginia National and CNB Financial

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

The idea behind Virginia National Bankshares and CNB Financial 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.