Correlation Between VersaBank and Postmedia Network
Can any of the company-specific risk be diversified away by investing in both VersaBank and Postmedia Network 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 Postmedia Network into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VersaBank and Postmedia Network Canada, you can compare the effects of market volatilities on VersaBank and Postmedia Network 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 Postmedia Network. Check out your portfolio center. Please also check ongoing floating volatility patterns of VersaBank and Postmedia Network.
Diversification Opportunities for VersaBank and Postmedia Network
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between VersaBank and Postmedia is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding VersaBank and Postmedia Network Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Postmedia Network Canada 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 Postmedia Network. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Postmedia Network Canada has no effect on the direction of VersaBank i.e., VersaBank and Postmedia Network go up and down completely randomly.
Pair Corralation between VersaBank and Postmedia Network
Assuming the 90 days trading horizon VersaBank is expected to generate 0.65 times more return on investment than Postmedia Network. However, VersaBank is 1.54 times less risky than Postmedia Network. It trades about 0.5 of its potential returns per unit of risk. Postmedia Network Canada is currently generating about -0.09 per unit of risk. If you would invest 2,096 in VersaBank on September 4, 2024 and sell it today you would earn a total of 404.00 from holding VersaBank or generate 19.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
VersaBank vs. Postmedia Network Canada
Performance |
| Timeline |
| VersaBank |
| Postmedia Network Canada |
VersaBank and Postmedia Network Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VersaBank and Postmedia Network
The main advantage of trading using opposite VersaBank and Postmedia Network positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VersaBank position performs unexpectedly, Postmedia Network 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 Postmedia Network will offset losses from the drop in Postmedia Network's long position.| VersaBank vs. Canadian Western Bank | VersaBank vs. National Bank of | VersaBank vs. Canadian Imperial Bank | VersaBank vs. Great West Lifeco |
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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