Correlation Between VP Bank and Basler Kantonalbank

Can any of the company-specific risk be diversified away by investing in both VP Bank and Basler Kantonalbank 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 VP Bank and Basler Kantonalbank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between VP Bank AG and Basler Kantonalbank, you can compare the effects of market volatilities on VP Bank and Basler Kantonalbank 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 VP Bank with a short position of Basler Kantonalbank. Check out your portfolio center. Please also check ongoing floating volatility patterns of VP Bank and Basler Kantonalbank.

Diversification Opportunities for VP Bank and Basler Kantonalbank

0.7

Correlation Coefficient

VP Bank  Basler Kantonalbank

Poor diversification

The 3 months correlation between VPBN and Basler is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding VP Bank AG and Basler Kantonalbank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basler Kantonalbank and VP Bank 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 VP Bank AG are associated (or correlated) with Basler Kantonalbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Basler Kantonalbank has no effect on the direction of VP Bank i.e., VP Bank and Basler Kantonalbank go up and down completely randomly.

Pair Corralation between VP Bank and Basler Kantonalbank

Assuming the 90 days trading horizon VP Bank is expected to generate 1.67 times less return on investment than Basler Kantonalbank. In addition to that, VP Bank is 1.2 times more volatile than Basler Kantonalbank. It trades about 0.11 of its total potential returns per unit of risk. Basler Kantonalbank is currently generating about 0.22 per unit of volatility. If you would invest  6,640  in Basler Kantonalbank on December 29, 2024 and sell it today you would earn a total of  980.00  from holding Basler Kantonalbank or generate 14.76% return on investment over 90 days.

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

VP Bank AG  vs.  Basler Kantonalbank

VP Bank AG

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VP Bank AG are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, VP Bank may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Basler Kantonalbank

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Basler Kantonalbank are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Basler Kantonalbank showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VP Bank and Basler Kantonalbank

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

The idea behind VP Bank AG and Basler Kantonalbank 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..