Correlation Between VersaBank and Power Nickel

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

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

Diversification Opportunities for VersaBank and Power Nickel

-0.49

Correlation Coefficient

VersaBank  Power Nickel

Very good diversification

The 3 months correlation between VersaBank and Power is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding VersaBank and Power Nickel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Nickel 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 Power Nickel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Nickel has no effect on the direction of VersaBank i.e., VersaBank and Power Nickel go up and down completely randomly.

Pair Corralation between VersaBank and Power Nickel

Assuming the 90 days trading horizon VersaBank is expected to under-perform the Power Nickel. But the stock apears to be less risky and, when comparing its historical volatility, VersaBank is 2.55 times less risky than Power Nickel. The stock trades about -0.18 of its potential returns per unit of risk. The Power Nickel is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  89.00  in Power Nickel on December 21, 2024 and sell it today you would earn a total of  78.00  from holding Power Nickel or generate 87.64% return on investment over 90 days.

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

VersaBank  vs.  Power Nickel

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.

Power Nickel

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Power Nickel are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Power Nickel showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VersaBank and Power Nickel

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

The idea behind VersaBank and Power Nickel 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.