Correlation Between VersaBank and Capital Bancorp

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

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

Diversification Opportunities for VersaBank and Capital Bancorp

0.35

Correlation Coefficient

VersaBank  Capital Bancorp

Weak diversification

The 3 months correlation between VersaBank and Capital is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding VersaBank and Capital Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Bancorp 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 Capital Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Bancorp has no effect on the direction of VersaBank i.e., VersaBank and Capital Bancorp go up and down completely randomly.

Pair Corralation between VersaBank and Capital Bancorp

Given the investment horizon of 90 days VersaBank is expected to under-perform the Capital Bancorp. In addition to that, VersaBank is 1.17 times more volatile than Capital Bancorp. It trades about -0.06 of its total potential returns per unit of risk. Capital Bancorp is currently generating about 0.05 per unit of volatility. If you would invest  2,529  in Capital Bancorp on October 12, 2024 and sell it today you would earn a total of  147.00  from holding Capital Bancorp or generate 5.81% return on investment over 90 days.

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

VersaBank  vs.  Capital Bancorp

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. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Capital Bancorp

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Bancorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Capital Bancorp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with VersaBank and Capital Bancorp

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

The idea behind VersaBank and Capital Bancorp 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 Global Correlations module to find global opportunities by holding instruments from different markets.