Correlation Between Virginia National and Village Bank

Can any of the company-specific risk be diversified away by investing in both Virginia National and Village 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 Virginia National and Village Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Virginia National Bankshares and Village Bank and, you can compare the effects of market volatilities on Virginia National and Village 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 Virginia National with a short position of Village Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virginia National and Village Bank.

Diversification Opportunities for Virginia National and Village Bank

-0.3

Correlation Coefficient

Virginia National  Village Bank

Very good diversification

The 3 months correlation between Virginia and Village is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Virginia National Bankshares and Village Bank and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Village Bank and Virginia National 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 Virginia National Bankshares are associated (or correlated) with Village Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Village Bank has no effect on the direction of Virginia National i.e., Virginia National and Village Bank go up and down completely randomly.

Pair Corralation between Virginia National and Village Bank

Given the investment horizon of 90 days Virginia National Bankshares is expected to under-perform the Village Bank. In addition to that, Virginia National is 1.61 times more volatile than Village Bank and. It trades about -0.44 of its total potential returns per unit of risk. Village Bank and is currently generating about -0.01 per unit of volatility. If you would invest  4,250  in Village Bank and on January 28, 2024 and sell it today you would lose (15.00) from holding Village Bank and or give up 0.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Virginia National Bankshares  vs.  Village Bank and

Virginia National

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Virginia National Bankshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in May 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Village Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Village Bank and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Village Bank is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Virginia National and Village Bank

The main advantage of trading using opposite Virginia National and Village Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Virginia National position performs unexpectedly, Village 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 Village Bank will offset losses from the drop in Village Bank's long position.

The idea behind Virginia National Bankshares and Village Bank and 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.

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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.