Correlation Between Veritex Holdings and Sterling Bancorp

Can any of the company-specific risk be diversified away by investing in both Veritex Holdings and Sterling 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 Sterling 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 Sterling Bancorp, you can compare the effects of market volatilities on Veritex Holdings and Sterling 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 Sterling Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Veritex Holdings and Sterling Bancorp.

Diversification Opportunities for Veritex Holdings and Sterling Bancorp

0.18

Correlation Coefficient

Veritex Holdings  Sterling Bancorp

Average diversification

The 3 months correlation between Veritex and Sterling is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Veritex Holdings and Sterling Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling 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 Sterling Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Bancorp has no effect on the direction of Veritex Holdings i.e., Veritex Holdings and Sterling Bancorp go up and down completely randomly.

Pair Corralation between Veritex Holdings and Sterling Bancorp

Given the investment horizon of 90 days Veritex Holdings is expected to under-perform the Sterling Bancorp. In addition to that, Veritex Holdings is 1.38 times more volatile than Sterling Bancorp. It trades about -0.06 of its total potential returns per unit of risk. Sterling Bancorp is currently generating about 0.05 per unit of volatility. If you would invest  473.00  in Sterling Bancorp on December 29, 2024 and sell it today you would earn a total of  17.00  from holding Sterling Bancorp or generate 3.59% return on investment over 90 days.

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

Veritex Holdings  vs.  Sterling 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 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.

Sterling Bancorp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sterling Bancorp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, Sterling Bancorp is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Veritex Holdings and Sterling Bancorp

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

The idea behind Veritex Holdings and Sterling 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.

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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 Global Correlations module to find global opportunities by holding instruments from different markets.