Correlation Between Virginia National and South Plains
Can any of the company-specific risk be diversified away by investing in both Virginia National and South Plains 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 South Plains 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 South Plains Financial, you can compare the effects of market volatilities on Virginia National and South Plains 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 South Plains. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virginia National and South Plains.
Diversification Opportunities for Virginia National and South Plains
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Virginia and South is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Virginia National Bankshares and South Plains Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South Plains 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 South Plains. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South Plains Financial has no effect on the direction of Virginia National i.e., Virginia National and South Plains go up and down completely randomly.
Pair Corralation between Virginia National and South Plains
Given the investment horizon of 90 days Virginia National is expected to generate 2.72 times less return on investment than South Plains. But when comparing it to its historical volatility, Virginia National Bankshares is 2.34 times less risky than South Plains. It trades about 0.14 of its potential returns per unit of risk. South Plains Financial is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 3,438 in South Plains Financial on August 30, 2024 and sell it today you would earn a total of 447.00 from holding South Plains Financial or generate 13.0% 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. South Plains Financial
Performance |
| Timeline |
| Virginia National |
| South Plains Financial |
Virginia National and South Plains Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Virginia National and South Plains
The main advantage of trading using opposite Virginia National and South Plains positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Virginia National position performs unexpectedly, South Plains 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 South Plains will offset losses from the drop in South Plains' long position.| Virginia National vs. Finward Bancorp | Virginia National vs. Community West Bancshares | Virginia National vs. First Financial Northwest | Virginia National vs. Oak Valley Bancorp |
| South Plains vs. Sound Financial Bancorp | South Plains vs. Finward Bancorp | South Plains vs. Franklin Financial Services | South Plains vs. Community West Bancshares |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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