Correlation Between Village Bank and ST Bancorp

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

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

Diversification Opportunities for Village Bank and ST Bancorp

-0.33

Correlation Coefficient

Village Bank  ST Bancorp

Very good diversification

The 3 months correlation between Village and STBA is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Village Bank and and ST Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ST Bancorp and Village Bank 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 Village Bank and are associated (or correlated) with ST Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ST Bancorp has no effect on the direction of Village Bank i.e., Village Bank and ST Bancorp go up and down completely randomly.

Pair Corralation between Village Bank and ST Bancorp

Given the investment horizon of 90 days Village Bank is expected to generate 73.5 times less return on investment than ST Bancorp. In addition to that, Village Bank is 1.2 times more volatile than ST Bancorp. It trades about 0.0 of its total potential returns per unit of risk. ST Bancorp is currently generating about 0.02 per unit of volatility. If you would invest  2,799  in ST Bancorp on January 30, 2024 and sell it today you would earn a total of  282.00  from holding ST Bancorp or generate 10.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.39%
Values	Daily Returns

Village Bank and  vs.  ST Bancorp

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.

ST Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ST Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Village Bank and ST Bancorp

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

The idea behind Village Bank and and ST Bancorp 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.