Correlation Between Veritex Holdings and Community Bank

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

By analyzing existing cross correlation between Veritex Holdings and Community Bank System, you can compare the effects of market volatilities on Veritex Holdings and Community Bank 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 Veritex Holdings with a short position of Community Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Veritex Holdings and Community Bank.

Diversification Opportunities for Veritex Holdings and Community Bank

0.57

Correlation Coefficient

Veritex Holdings  Community Bank

Very weak diversification

The 3 months correlation between Veritex and Community is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Veritex Holdings and Community Bank System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Bank System and Veritex Holdings 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 Veritex Holdings are associated (or correlated) with Community Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Bank System has no effect on the direction of Veritex Holdings i.e., Veritex Holdings and Community Bank go up and down completely randomly.

Pair Corralation between Veritex Holdings and Community Bank

Given the investment horizon of 90 days Veritex Holdings is expected to under-perform the Community Bank. In addition to that, Veritex Holdings is 1.06 times more volatile than Community Bank System. It trades about -0.08 of its total potential returns per unit of risk. Community Bank System is currently generating about -0.07 per unit of volatility. If you would invest  6,141  in Community Bank System on December 30, 2024 and sell it today you would lose (466.00) from holding Community Bank System or give up 7.59% of portfolio value over 90 days.

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

Veritex Holdings  vs.  Community Bank System

Veritex Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Veritex Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Community Bank System

Risk-Adjusted Performance

Very Weak

Over the last 90 days Community Bank System has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's fundamental drivers remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Veritex Holdings and Community Bank

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

The idea behind Veritex Holdings and Community Bank System 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.