Correlation Between VersaBank and First Foundation

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Can any of the company-specific risk be diversified away by investing in both VersaBank and First Foundation 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 Foundation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VersaBank and First Foundation, you can compare the effects of market volatilities on VersaBank and First Foundation 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 Foundation. Check out your portfolio center. Please also check ongoing floating volatility patterns of VersaBank and First Foundation.

Diversification Opportunities for VersaBank and First Foundation

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between VersaBank and First is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding VersaBank and First Foundation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Foundation 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 Foundation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Foundation has no effect on the direction of VersaBank i.e., VersaBank and First Foundation go up and down completely randomly.

Pair Corralation between VersaBank and First Foundation

Given the investment horizon of 90 days VersaBank is expected to generate 0.4 times more return on investment than First Foundation. However, VersaBank is 2.48 times less risky than First Foundation. It trades about 0.1 of its potential returns per unit of risk. First Foundation is currently generating about 0.0 per unit of risk. If you would invest  738.00  in VersaBank on September 3, 2024 and sell it today you would earn a total of  1,061  from holding VersaBank or generate 143.77% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

VersaBank  vs.  First Foundation

 Performance 
       Timeline  
VersaBank 

Risk-Adjusted Performance

18 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in VersaBank are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, VersaBank disclosed solid returns over the last few months and may actually be approaching a breakup point.
First Foundation 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in First Foundation are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, First Foundation displayed solid returns over the last few months and may actually be approaching a breakup point.

VersaBank and First Foundation Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with VersaBank and First Foundation

The main advantage of trading using opposite VersaBank and First Foundation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VersaBank position performs unexpectedly, First Foundation 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 Foundation will offset losses from the drop in First Foundation's long position.
The idea behind VersaBank and First Foundation pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.

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