Correlation Between Veritex Holdings and Richmond Mutual

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

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

Diversification Opportunities for Veritex Holdings and Richmond Mutual

0.82

Correlation Coefficient

Veritex Holdings  Richmond Mutual

Very poor diversification

The 3 months correlation between Veritex and Richmond is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Veritex Holdings and Richmond Mutual Bancorp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Richmond Mutual Banc 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 Richmond Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Richmond Mutual Banc has no effect on the direction of Veritex Holdings i.e., Veritex Holdings and Richmond Mutual go up and down completely randomly.

Pair Corralation between Veritex Holdings and Richmond Mutual

Given the investment horizon of 90 days Veritex Holdings is expected to generate 2.16 times more return on investment than Richmond Mutual. However, Veritex Holdings is 2.16 times more volatile than Richmond Mutual Bancorporation. It trades about 0.16 of its potential returns per unit of risk. Richmond Mutual Bancorporation is currently generating about 0.2 per unit of risk. If you would invest  2,447  in Veritex Holdings on September 2, 2024 and sell it today you would earn a total of  594.00  from holding Veritex Holdings or generate 24.27% return on investment over 90 days.

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

Veritex Holdings  vs.  Richmond Mutual Bancorp.

Veritex Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Veritex Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Veritex Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Richmond Mutual Banc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Richmond Mutual Bancorporation are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental drivers, Richmond Mutual demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Veritex Holdings and Richmond Mutual

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

The idea behind Veritex Holdings and Richmond Mutual Bancorporation 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.