Correlation Between VersaBank and Alaska Energy

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

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

Diversification Opportunities for VersaBank and Alaska Energy

-0.54

Correlation Coefficient

VersaBank  Alaska Energy

Excellent diversification

The 3 months correlation between VersaBank and Alaska is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding VersaBank and Alaska Energy Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alaska Energy Metals and VersaBank 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 VersaBank are associated (or correlated) with Alaska Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alaska Energy Metals has no effect on the direction of VersaBank i.e., VersaBank and Alaska Energy go up and down completely randomly.

Pair Corralation between VersaBank and Alaska Energy

Assuming the 90 days trading horizon VersaBank is expected to under-perform the Alaska Energy. But the stock apears to be less risky and, when comparing its historical volatility, VersaBank is 1.37 times less risky than Alaska Energy. The stock trades about -0.28 of its potential returns per unit of risk. The Alaska Energy Metals is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  13.00  in Alaska Energy Metals on September 24, 2024 and sell it today you would lose (2.00) from holding Alaska Energy Metals or give up 15.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

VersaBank  vs.  Alaska Energy Metals

VersaBank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in VersaBank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, VersaBank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Alaska Energy Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alaska Energy Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with VersaBank and Alaska Energy

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

The idea behind VersaBank and Alaska Energy Metals 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.