Correlation Between Veritex Holdings and US Century

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

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

Diversification Opportunities for Veritex Holdings and US Century

0.62

Correlation Coefficient

Veritex Holdings  US Century

Poor diversification

The 3 months correlation between Veritex and USCB is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Veritex Holdings and US Century Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Century Bank 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 US Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Century Bank has no effect on the direction of Veritex Holdings i.e., Veritex Holdings and US Century go up and down completely randomly.

Pair Corralation between Veritex Holdings and US Century

Given the investment horizon of 90 days Veritex Holdings is expected to under-perform the US Century. But the stock apears to be less risky and, when comparing its historical volatility, Veritex Holdings is 1.05 times less risky than US Century. The stock trades about -0.09 of its potential returns per unit of risk. The US Century Bank is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,955  in US Century Bank on December 3, 2024 and sell it today you would lose (7.00) from holding US Century Bank or give up 0.36% of portfolio value over 90 days.

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

Veritex Holdings  vs.  US Century Bank

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.

US Century Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days US Century Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, US Century is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Veritex Holdings and US Century

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

The idea behind Veritex Holdings and US Century Bank 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.