Correlation Between VersaBank and Steppe Gold

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

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

Diversification Opportunities for VersaBank and Steppe Gold

-0.44

Correlation Coefficient

VersaBank  Steppe Gold

Very good diversification

The 3 months correlation between VersaBank and Steppe is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding VersaBank and Steppe Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steppe Gold 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 Steppe Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steppe Gold has no effect on the direction of VersaBank i.e., VersaBank and Steppe Gold go up and down completely randomly.

Pair Corralation between VersaBank and Steppe Gold

Assuming the 90 days trading horizon VersaBank is expected to generate 0.86 times more return on investment than Steppe Gold. However, VersaBank is 1.16 times less risky than Steppe Gold. It trades about 0.07 of its potential returns per unit of risk. Steppe Gold is currently generating about -0.11 per unit of risk. If you would invest  1,854  in VersaBank on October 9, 2024 and sell it today you would earn a total of  180.00  from holding VersaBank or generate 9.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

VersaBank  vs.  Steppe Gold

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 February 2025.

Steppe Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Steppe Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with VersaBank and Steppe Gold

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

The idea behind VersaBank and Steppe Gold 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..