Correlation Between Virginia National and Orange County

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

Diversification Opportunities for Virginia National and Orange County

0.65

Correlation Coefficient

Virginia National  Orange County

Poor diversification

The 3 months correlation between Virginia and Orange is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Virginia National Bankshares and Orange County Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orange 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 Orange County. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orange County Bancorp has no effect on the direction of Virginia National i.e., Virginia National and Orange County go up and down completely randomly.

Pair Corralation between Virginia National and Orange County

Given the investment horizon of 90 days Virginia National Bankshares is expected to generate 0.57 times more return on investment than Orange County. However, Virginia National Bankshares is 1.76 times less risky than Orange County. It trades about 0.06 of its potential returns per unit of risk. Orange County Bancorp is currently generating about 0.03 per unit of risk. If you would invest  3,872  in Virginia National Bankshares on September 3, 2024 and sell it today you would earn a total of  210.00  from holding Virginia National Bankshares or generate 5.42% return on investment over 90 days.

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

Virginia National Bankshares  vs.  Orange County Bancorp

Virginia National

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Virginia National Bankshares are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Virginia National is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Orange County Bancorp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Orange County Bancorp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, Orange County is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Virginia National and Orange County

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

The idea behind Virginia National Bankshares and Orange 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.