Correlation Between Virginia National and CNB Financial
Can any of the company-specific risk be diversified away by investing in both Virginia National and CNB Financial 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 Virginia National and CNB Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Virginia National Bankshares and CNB Financial, you can compare the effects of market volatilities on Virginia National and CNB Financial 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 Virginia National with a short position of CNB Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virginia National and CNB Financial.
Diversification Opportunities for Virginia National and CNB Financial
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Virginia and CNB is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Virginia National Bankshares and CNB Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNB Financial and Virginia National 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 Virginia National Bankshares are associated (or correlated) with CNB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNB Financial has no effect on the direction of Virginia National i.e., Virginia National and CNB Financial go up and down completely randomly.
Pair Corralation between Virginia National and CNB Financial
Given the investment horizon of 90 days Virginia National is expected to generate 1.1 times less return on investment than CNB Financial. In addition to that, Virginia National is 1.05 times more volatile than CNB Financial. It trades about 0.03 of its total potential returns per unit of risk. CNB Financial is currently generating about 0.03 per unit of volatility. If you would invest 2,308 in CNB Financial on August 27, 2024 and sell it today you would earn a total of 505.00 from holding CNB Financial or generate 21.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Virginia National Bankshares vs. CNB Financial
Performance |
| Timeline |
| Virginia National |
| CNB Financial |
Virginia National and CNB Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Virginia National and CNB Financial
The main advantage of trading using opposite Virginia National and CNB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Virginia National position performs unexpectedly, CNB Financial 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 CNB Financial will offset losses from the drop in CNB Financial's long position.| Virginia National vs. Fifth Third Bancorp | Virginia National vs. Zions Bancorporation | Virginia National vs. Huntington Bancshares Incorporated | Virginia National vs. Comerica |
| CNB Financial vs. Fifth Third Bancorp | CNB Financial vs. Zions Bancorporation | CNB Financial vs. Huntington Bancshares Incorporated | CNB Financial vs. Comerica |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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