Correlation Between VersaBank and Fifth Third

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

By analyzing existing cross correlation between VersaBank and Fifth Third Bancorp, you can compare the effects of market volatilities on VersaBank and Fifth Third 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 Fifth Third. Check out your portfolio center. Please also check ongoing floating volatility patterns of VersaBank and Fifth Third.

Diversification Opportunities for VersaBank and Fifth Third

0.91

Correlation Coefficient

VersaBank  Fifth Third

Almost no diversification

The 3 months correlation between VersaBank and Fifth is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding VersaBank and Fifth Third Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fifth Third Bancorp 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 Fifth Third. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fifth Third Bancorp has no effect on the direction of VersaBank i.e., VersaBank and Fifth Third go up and down completely randomly.

Pair Corralation between VersaBank and Fifth Third

Given the investment horizon of 90 days VersaBank is expected to generate 1.63 times more return on investment than Fifth Third. However, VersaBank is 1.63 times more volatile than Fifth Third Bancorp. It trades about -0.07 of its potential returns per unit of risk. Fifth Third Bancorp is currently generating about -0.17 per unit of risk. If you would invest  1,369  in VersaBank on January 18, 2025 and sell it today you would lose (247.00) from holding VersaBank or give up 18.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

VersaBank  vs.  Fifth Third Bancorp

VersaBank

Risk-Adjusted Performance

Very Weak

Over the last 90 days VersaBank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in May 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Fifth Third Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fifth Third Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in May 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with VersaBank and Fifth Third

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

The idea behind VersaBank and Fifth Third 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.