Correlation Between VersaBank and Texas Capital

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

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

Diversification Opportunities for VersaBank and Texas Capital

-0.08

Correlation Coefficient

VersaBank  Texas Capital

Good diversification

The 3 months correlation between VersaBank and Texas is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding VersaBank and Texas Capital Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Capital Bancshares 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 Texas Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texas Capital Bancshares has no effect on the direction of VersaBank i.e., VersaBank and Texas Capital go up and down completely randomly.

Pair Corralation between VersaBank and Texas Capital

Given the investment horizon of 90 days VersaBank is expected to under-perform the Texas Capital. In addition to that, VersaBank is 2.64 times more volatile than Texas Capital Bancshares. It trades about -0.18 of its total potential returns per unit of risk. Texas Capital Bancshares is currently generating about 0.08 per unit of volatility. If you would invest  1,946  in Texas Capital Bancshares on December 22, 2024 and sell it today you would earn a total of  84.00  from holding Texas Capital Bancshares or generate 4.32% return on investment over 90 days.

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

VersaBank  vs.  Texas Capital Bancshares

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. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Texas Capital Bancshares

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Capital Bancshares are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Texas Capital is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with VersaBank and Texas Capital

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

The idea behind VersaBank and Texas Capital Bancshares 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.