Correlation Between Virginia National and Greene County

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

Diversification Opportunities for Virginia National and Greene County

0.73

Correlation Coefficient

Virginia National  Greene County

Poor diversification

The 3 months correlation between Virginia and Greene is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Virginia National Bankshares and Greene County Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greene County Bancorp 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 Greene County. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greene County Bancorp has no effect on the direction of Virginia National i.e., Virginia National and Greene County go up and down completely randomly.

Pair Corralation between Virginia National and Greene County

Given the investment horizon of 90 days Virginia National Bankshares is expected to under-perform the Greene County. But the stock apears to be less risky and, when comparing its historical volatility, Virginia National Bankshares is 1.72 times less risky than Greene County. The stock trades about -0.06 of its potential returns per unit of risk. The Greene County Bancorp is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,889  in Greene County Bancorp on October 7, 2024 and sell it today you would lose (167.00) from holding Greene County Bancorp or give up 5.78% 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.  Greene County Bancorp

Virginia National

Risk-Adjusted Performance

0 of 100

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 latest unsteady performance, the Stock's fundamental drivers remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Greene County Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Greene County Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Greene County is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Virginia National and Greene County

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

The idea behind Virginia National Bankshares and Greene County Bancorp 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.