Correlation Between Village Bank and Ames National

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

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

Diversification Opportunities for Village Bank and Ames National

0.47

Correlation Coefficient

Village Bank  Ames National

Very weak diversification

The 3 months correlation between Village and Ames is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Village Bank and and Ames National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ames National and Village Bank 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 Village Bank and are associated (or correlated) with Ames National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ames National has no effect on the direction of Village Bank i.e., Village Bank and Ames National go up and down completely randomly.

Pair Corralation between Village Bank and Ames National

Given the investment horizon of 90 days Village Bank is expected to generate 9.9 times less return on investment than Ames National. But when comparing it to its historical volatility, Village Bank and is 2.71 times less risky than Ames National. It trades about 0.04 of its potential returns per unit of risk. Ames National is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,576  in Ames National on December 21, 2024 and sell it today you would earn a total of  174.00  from holding Ames National or generate 11.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	81.67%
Values	Daily Returns

Village Bank and  vs.  Ames National

Village Bank

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Village Bank and are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Village Bank is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Ames National

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ames National are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, Ames National may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Village Bank and Ames National

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

The idea behind Village Bank and and Ames National 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.