Correlation Between Virginia National and Tri-County Financial

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

Diversification Opportunities for Virginia National and Tri-County Financial

0.24

Correlation Coefficient

Virginia National  Tri-County Financial

Modest diversification

The 3 months correlation between Virginia and Tri-County is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Virginia National Bankshares and Tri County Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tri County 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 Tri-County Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tri County Financial has no effect on the direction of Virginia National i.e., Virginia National and Tri-County Financial go up and down completely randomly.

Pair Corralation between Virginia National and Tri-County Financial

Given the investment horizon of 90 days Virginia National Bankshares is expected to generate 1.77 times more return on investment than Tri-County Financial. However, Virginia National is 1.77 times more volatile than Tri County Financial Group. It trades about 0.07 of its potential returns per unit of risk. Tri County Financial Group is currently generating about 0.1 per unit of risk. If you would invest  3,902  in Virginia National Bankshares on September 5, 2024 and sell it today you would earn a total of  272.00  from holding Virginia National Bankshares or generate 6.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

Virginia National Bankshares  vs.  Tri County Financial Group

Virginia National

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Virginia National Bankshares are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady fundamental drivers, Virginia National may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Tri County Financial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tri County Financial Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Tri-County Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Virginia National and Tri-County Financial

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

The idea behind Virginia National Bankshares and Tri County Financial Group 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.