Correlation Between VersaBank and Westamerica Bancorporation
Can any of the company-specific risk be diversified away by investing in both VersaBank and Westamerica Bancorporation 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 Westamerica Bancorporation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VersaBank and Westamerica Bancorporation, you can compare the effects of market volatilities on VersaBank and Westamerica Bancorporation 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 Westamerica Bancorporation. Check out your portfolio center. Please also check ongoing floating volatility patterns of VersaBank and Westamerica Bancorporation.
Diversification Opportunities for VersaBank and Westamerica Bancorporation
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between VersaBank and Westamerica is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding VersaBank and Westamerica Bancorp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westamerica Bancorporation 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 Westamerica Bancorporation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westamerica Bancorporation has no effect on the direction of VersaBank i.e., VersaBank and Westamerica Bancorporation go up and down completely randomly.
Pair Corralation between VersaBank and Westamerica Bancorporation
Given the investment horizon of 90 days VersaBank is expected to generate 1.07 times more return on investment than Westamerica Bancorporation. However, VersaBank is 1.07 times more volatile than Westamerica Bancorporation. It trades about 0.1 of its potential returns per unit of risk. Westamerica Bancorporation is currently generating about 0.02 per unit of risk. If you would invest 733.00 in VersaBank on August 30, 2024 and sell it today you would earn a total of 1,061 from holding VersaBank or generate 144.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
VersaBank vs. Westamerica Bancorp.
Performance |
| Timeline |
| VersaBank |
| Westamerica Bancorporation |
VersaBank and Westamerica Bancorporation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VersaBank and Westamerica Bancorporation
The main advantage of trading using opposite VersaBank and Westamerica Bancorporation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VersaBank position performs unexpectedly, Westamerica Bancorporation 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 Westamerica Bancorporation will offset losses from the drop in Westamerica Bancorporation's long position.| VersaBank vs. Mountain Commerce Bancorp | VersaBank vs. American Riviera Bank | VersaBank vs. Home Federal Bancorp | VersaBank vs. Prime Meridian Holding |
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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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