Correlation Between VersaBank and IA Financial
Can any of the company-specific risk be diversified away by investing in both VersaBank and IA 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 VersaBank and IA Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VersaBank and iA Financial, you can compare the effects of market volatilities on VersaBank and IA 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 VersaBank with a short position of IA Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of VersaBank and IA Financial.
Diversification Opportunities for VersaBank and IA Financial
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between VersaBank and IAG is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding VersaBank and iA Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iA Financial and VersaBank 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 VersaBank are associated (or correlated) with IA Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iA Financial has no effect on the direction of VersaBank i.e., VersaBank and IA Financial go up and down completely randomly.
Pair Corralation between VersaBank and IA Financial
Assuming the 90 days trading horizon VersaBank is expected to generate 1.45 times more return on investment than IA Financial. However, VersaBank is 1.45 times more volatile than iA Financial. It trades about 0.11 of its potential returns per unit of risk. iA Financial is currently generating about 0.09 per unit of risk. If you would invest 1,044 in VersaBank on September 12, 2024 and sell it today you would earn a total of 1,154 from holding VersaBank or generate 110.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
VersaBank vs. iA Financial
Performance |
| Timeline |
| VersaBank |
| iA Financial |
VersaBank and IA Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VersaBank and IA Financial
The main advantage of trading using opposite VersaBank and IA Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VersaBank position performs unexpectedly, IA 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 IA Financial will offset losses from the drop in IA Financial's long position.| VersaBank vs. Brompton Lifeco Split | VersaBank vs. North American Financial | VersaBank vs. Prime Dividend Corp | VersaBank vs. Financial 15 Split |
| IA Financial vs. Brompton Lifeco Split | IA Financial vs. North American Financial | IA Financial vs. Prime Dividend Corp | IA Financial vs. Financial 15 Split |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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