Correlation Between Village Bank and VersaBank

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

Diversification Opportunities for Village Bank and VersaBank

-0.82

Correlation Coefficient

Village Bank  VersaBank

Pay attention - limited upside

The 3 months correlation between Village and VersaBank is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Village Bank and and VersaBank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VersaBank 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 VersaBank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VersaBank has no effect on the direction of Village Bank i.e., Village Bank and VersaBank go up and down completely randomly.

Pair Corralation between Village Bank and VersaBank

Given the investment horizon of 90 days Village Bank and is expected to generate 0.14 times more return on investment than VersaBank. However, Village Bank and is 7.19 times less risky than VersaBank. It trades about 0.18 of its potential returns per unit of risk. VersaBank is currently generating about -0.18 per unit of risk. If you would invest  7,767  in Village Bank and on December 29, 2024 and sell it today you would earn a total of  253.00  from holding Village Bank and or generate 3.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	83.61%
Values	Daily Returns

Village Bank and  vs.  VersaBank

Village Bank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Village Bank and are ranked lower than 14 (%) 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.

VersaBank

Risk-Adjusted Performance

Very Weak

Over the last 90 days VersaBank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Village Bank and VersaBank

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

The idea behind Village Bank and and VersaBank 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.