Correlation Between Veritex Holdings and CF Bankshares

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

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

Diversification Opportunities for Veritex Holdings and CF Bankshares

0.8

Correlation Coefficient

Veritex Holdings  CF Bankshares

Very poor diversification

The 3 months correlation between Veritex and CFBK is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Veritex Holdings and CF Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Bankshares 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 CF Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Bankshares has no effect on the direction of Veritex Holdings i.e., Veritex Holdings and CF Bankshares go up and down completely randomly.

Pair Corralation between Veritex Holdings and CF Bankshares

Given the investment horizon of 90 days Veritex Holdings is expected to generate 0.98 times more return on investment than CF Bankshares. However, Veritex Holdings is 1.02 times less risky than CF Bankshares. It trades about -0.06 of its potential returns per unit of risk. CF Bankshares is currently generating about -0.11 per unit of risk. If you would invest  2,685  in Veritex Holdings on December 28, 2024 and sell it today you would lose (202.00) from holding Veritex Holdings or give up 7.52% of portfolio value over 90 days.

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

Veritex Holdings  vs.  CF Bankshares

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.

CF Bankshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days CF Bankshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental drivers remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Veritex Holdings and CF Bankshares

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

The idea behind Veritex Holdings and CF Bankshares 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.