Correlation Between VersaBank and Mountain Boy

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

By analyzing existing cross correlation between VersaBank and Mountain Boy Minerals, you can compare the effects of market volatilities on VersaBank and Mountain Boy 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 Mountain Boy. Check out your portfolio center. Please also check ongoing floating volatility patterns of VersaBank and Mountain Boy.

Diversification Opportunities for VersaBank and Mountain Boy

-0.03

Correlation Coefficient

VersaBank  Mountain Boy

Good diversification

The 3 months correlation between VersaBank and Mountain is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding VersaBank and Mountain Boy Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mountain Boy Minerals 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 Mountain Boy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mountain Boy Minerals has no effect on the direction of VersaBank i.e., VersaBank and Mountain Boy go up and down completely randomly.

Pair Corralation between VersaBank and Mountain Boy

Assuming the 90 days trading horizon VersaBank is expected to under-perform the Mountain Boy. But the stock apears to be less risky and, when comparing its historical volatility, VersaBank is 10.38 times less risky than Mountain Boy. The stock trades about -0.17 of its potential returns per unit of risk. The Mountain Boy Minerals is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Mountain Boy Minerals on December 24, 2024 and sell it today you would lose (0.50) from holding Mountain Boy Minerals or give up 25.0% of portfolio value over 90 days.

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

VersaBank  vs.  Mountain Boy Minerals

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. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Mountain Boy Minerals

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mountain Boy Minerals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Mountain Boy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VersaBank and Mountain Boy

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

The idea behind VersaBank and Mountain Boy Minerals 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.