Correlation Between VersaBank and National Bank
Can any of the company-specific risk be diversified away by investing in both VersaBank and National Bank 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 National Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VersaBank and National Bank Holdings, you can compare the effects of market volatilities on VersaBank and National Bank 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 National Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of VersaBank and National Bank.
Diversification Opportunities for VersaBank and National Bank
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between VersaBank and National is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding VersaBank and National Bank Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank Holdings 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 National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank Holdings has no effect on the direction of VersaBank i.e., VersaBank and National Bank go up and down completely randomly.
Pair Corralation between VersaBank and National Bank
Given the investment horizon of 90 days VersaBank is expected to generate 0.58 times more return on investment than National Bank. However, VersaBank is 1.72 times less risky than National Bank. It trades about 0.37 of its potential returns per unit of risk. National Bank Holdings is currently generating about 0.12 per unit of risk. If you would invest 1,475 in VersaBank on August 27, 2024 and sell it today you would earn a total of 237.00 from holding VersaBank or generate 16.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
VersaBank vs. National Bank Holdings
Performance |
| Timeline |
| VersaBank |
| National Bank Holdings |
VersaBank and National Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VersaBank and National Bank
The main advantage of trading using opposite VersaBank and National Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VersaBank position performs unexpectedly, National Bank 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 National Bank will offset losses from the drop in National Bank's long position.| VersaBank vs. Fifth Third Bancorp | VersaBank vs. Zions Bancorporation | VersaBank vs. Huntington Bancshares Incorporated | VersaBank vs. Comerica |
| National Bank vs. Fifth Third Bancorp | National Bank vs. Zions Bancorporation | National Bank vs. Huntington Bancshares Incorporated | National Bank vs. Comerica |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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