Correlation Between Veritex Holdings and PCB Bancorp

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

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

Diversification Opportunities for Veritex Holdings and PCB Bancorp

0.91

Correlation Coefficient

Veritex Holdings  PCB Bancorp

Almost no diversification

The 3 months correlation between Veritex and PCB is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Veritex Holdings and PCB Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PCB Bancorp 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 PCB Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PCB Bancorp has no effect on the direction of Veritex Holdings i.e., Veritex Holdings and PCB Bancorp go up and down completely randomly.

Pair Corralation between Veritex Holdings and PCB Bancorp

Given the investment horizon of 90 days Veritex Holdings is expected to under-perform the PCB Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, Veritex Holdings is 1.0 times less risky than PCB Bancorp. The stock trades about -0.1 of its potential returns per unit of risk. The PCB Bancorp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,881  in PCB Bancorp on November 29, 2024 and sell it today you would earn a total of  51.00  from holding PCB Bancorp or generate 2.71% return on investment over 90 days.

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

Veritex Holdings  vs.  PCB Bancorp

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 unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

PCB Bancorp

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Veritex Holdings and PCB Bancorp

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

The idea behind Veritex Holdings and PCB 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.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.