Correlation Between Veritex Holdings and Southern California

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

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

Diversification Opportunities for Veritex Holdings and Southern California

0.89

Correlation Coefficient

Veritex Holdings  Southern California

Very poor diversification

The 3 months correlation between Veritex and Southern is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Veritex Holdings and Southern California Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern California and Veritex Holdings 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 Veritex Holdings are associated (or correlated) with Southern California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern California has no effect on the direction of Veritex Holdings i.e., Veritex Holdings and Southern California go up and down completely randomly.

Pair Corralation between Veritex Holdings and Southern California

Given the investment horizon of 90 days Veritex Holdings is expected to generate 1.53 times less return on investment than Southern California. In addition to that, Veritex Holdings is 1.62 times more volatile than Southern California Bancorp. It trades about 0.1 of its total potential returns per unit of risk. Southern California Bancorp is currently generating about 0.26 per unit of volatility. If you would invest  1,678  in Southern California Bancorp on September 9, 2024 and sell it today you would earn a total of  86.00  from holding Southern California Bancorp or generate 5.13% return on investment over 90 days.

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

Veritex Holdings  vs.  Southern California Bancorp

Veritex Holdings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Veritex Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Veritex Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Southern California

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Southern California Bancorp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Southern California disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Veritex Holdings and Southern California

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

The idea behind Veritex Holdings and Southern California 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.