Correlation Between VersaBank and First Commonwealth
Can any of the company-specific risk be diversified away by investing in both VersaBank and First Commonwealth 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 First Commonwealth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VersaBank and First Commonwealth Financial, you can compare the effects of market volatilities on VersaBank and First Commonwealth 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 First Commonwealth. Check out your portfolio center. Please also check ongoing floating volatility patterns of VersaBank and First Commonwealth.
Diversification Opportunities for VersaBank and First Commonwealth
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between VersaBank and First is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding VersaBank and First Commonwealth Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Commonwealth 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 First Commonwealth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Commonwealth has no effect on the direction of VersaBank i.e., VersaBank and First Commonwealth go up and down completely randomly.
Pair Corralation between VersaBank and First Commonwealth
Given the investment horizon of 90 days VersaBank is expected to under-perform the First Commonwealth. In addition to that, VersaBank is 1.03 times more volatile than First Commonwealth Financial. It trades about -0.05 of its total potential returns per unit of risk. First Commonwealth Financial is currently generating about 0.01 per unit of volatility. If you would invest 1,650 in First Commonwealth Financial on October 25, 2024 and sell it today you would lose (6.00) from holding First Commonwealth Financial or give up 0.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
VersaBank vs. First Commonwealth Financial
Performance |
| Timeline |
| VersaBank |
| First Commonwealth |
VersaBank and First Commonwealth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VersaBank and First Commonwealth
The main advantage of trading using opposite VersaBank and First Commonwealth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VersaBank position performs unexpectedly, First Commonwealth 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 First Commonwealth will offset losses from the drop in First Commonwealth's long position.| VersaBank vs. Mountain Commerce Bancorp | VersaBank vs. American Riviera Bank | VersaBank vs. Home Federal Bancorp | VersaBank vs. Village Bank and |
| First Commonwealth vs. Great Southern Bancorp | First Commonwealth vs. Heritage Financial | First Commonwealth vs. Finward Bancorp | First Commonwealth vs. QCR Holdings |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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