Correlation Between VersaBank and Western Energy

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

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

Diversification Opportunities for VersaBank and Western Energy

-0.31

Correlation Coefficient

VersaBank  Western Energy

Very good diversification

The 3 months correlation between VersaBank and Western is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding VersaBank and Western Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Energy Services 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 Western Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Energy Services has no effect on the direction of VersaBank i.e., VersaBank and Western Energy go up and down completely randomly.

Pair Corralation between VersaBank and Western Energy

Assuming the 90 days trading horizon VersaBank is expected to generate 0.72 times more return on investment than Western Energy. However, VersaBank is 1.39 times less risky than Western Energy. It trades about 0.07 of its potential returns per unit of risk. Western Energy Services is currently generating about 0.0 per unit of risk. If you would invest  1,031  in VersaBank on October 24, 2024 and sell it today you would earn a total of  936.00  from holding VersaBank or generate 90.79% return on investment over 90 days.

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

VersaBank  vs.  Western Energy Services

VersaBank

Risk-Adjusted Performance

0 of 100

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 very healthy basic indicators, VersaBank is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Western Energy Services

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Western Energy Services are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Western Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with VersaBank and Western Energy

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

The idea behind VersaBank and Western Energy Services 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.