Correlation Between Veritex Holdings and International Bancshares

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

By analyzing existing cross correlation between Veritex Holdings and International Bancshares, you can compare the effects of market volatilities on Veritex Holdings and International Bancshares 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 International Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Veritex Holdings and International Bancshares.

Diversification Opportunities for Veritex Holdings and International Bancshares

0.8

Correlation Coefficient

Veritex Holdings  International Bancshares

Very poor diversification

The 3 months correlation between Veritex and International is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Veritex Holdings and International Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Bancshares 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 International Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Bancshares has no effect on the direction of Veritex Holdings i.e., Veritex Holdings and International Bancshares go up and down completely randomly.

Pair Corralation between Veritex Holdings and International Bancshares

Given the investment horizon of 90 days Veritex Holdings is expected to generate 2.26 times less return on investment than International Bancshares. In addition to that, Veritex Holdings is 1.37 times more volatile than International Bancshares. It trades about 0.02 of its total potential returns per unit of risk. International Bancshares is currently generating about 0.06 per unit of volatility. If you would invest  4,368  in International Bancshares on March 17, 2024 and sell it today you would earn a total of  1,077  from holding International Bancshares or generate 24.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.6%
Values	Daily Returns

Veritex Holdings  vs.  International Bancshares

Veritex Holdings

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Veritex Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Veritex Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

International Bancshares

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in International Bancshares are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, International Bancshares is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Veritex Holdings and International Bancshares

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

The idea behind Veritex Holdings and International Bancshares 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.