Correlation Between Canso Credit and VersaBank
Can any of the company-specific risk be diversified away by investing in both Canso Credit and VersaBank 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 Canso Credit and VersaBank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canso Credit Trust and VersaBank, you can compare the effects of market volatilities on Canso Credit and VersaBank 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 Canso Credit with a short position of VersaBank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canso Credit and VersaBank.
Diversification Opportunities for Canso Credit and VersaBank
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Canso and VersaBank is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Canso Credit Trust and VersaBank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VersaBank and Canso Credit 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 Canso Credit Trust are associated (or correlated) with VersaBank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VersaBank has no effect on the direction of Canso Credit i.e., Canso Credit and VersaBank go up and down completely randomly.
Pair Corralation between Canso Credit and VersaBank
Assuming the 90 days trading horizon Canso Credit is expected to generate 22.65 times less return on investment than VersaBank. But when comparing it to its historical volatility, Canso Credit Trust is 5.03 times less risky than VersaBank. It trades about 0.08 of its potential returns per unit of risk. VersaBank is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 1,767 in VersaBank on August 25, 2024 and sell it today you would earn a total of 603.00 from holding VersaBank or generate 34.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canso Credit Trust vs. VersaBank
Performance |
| Timeline |
| Canso Credit Trust |
| VersaBank |
Canso Credit and VersaBank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canso Credit and VersaBank
The main advantage of trading using opposite Canso Credit and VersaBank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canso Credit position performs unexpectedly, VersaBank 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 VersaBank will offset losses from the drop in VersaBank's long position.| Canso Credit vs. Royal Bank of | Canso Credit vs. Toronto Dominion Bank | Canso Credit vs. Toronto Dominion Bank Pref | Canso Credit vs. Amazon CDR |
| VersaBank vs. Sylogist | VersaBank vs. Sangoma Technologies Corp | VersaBank vs. Firan Technology Group | VersaBank vs. Hammond Power Solutions |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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