Correlation Between Oak Ridge and First Business
Can any of the company-specific risk be diversified away by investing in both Oak Ridge and First Business 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 Oak Ridge and First Business into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oak Ridge Financial and First Business Financial, you can compare the effects of market volatilities on Oak Ridge and First Business 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 Oak Ridge with a short position of First Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oak Ridge and First Business.
Diversification Opportunities for Oak Ridge and First Business
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Oak and First is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Oak Ridge Financial and First Business Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Business Financial and Oak Ridge 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 Oak Ridge Financial are associated (or correlated) with First Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Business Financial has no effect on the direction of Oak Ridge i.e., Oak Ridge and First Business go up and down completely randomly.
Pair Corralation between Oak Ridge and First Business
Given the investment horizon of 90 days Oak Ridge is expected to generate 2.28 times less return on investment than First Business. But when comparing it to its historical volatility, Oak Ridge Financial is 3.75 times less risky than First Business. It trades about 0.41 of its potential returns per unit of risk. First Business Financial is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 4,259 in First Business Financial on September 1, 2024 and sell it today you would earn a total of 753.00 from holding First Business Financial or generate 17.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Oak Ridge Financial vs. First Business Financial
Performance |
| Timeline |
| Oak Ridge Financial |
| First Business Financial |
Oak Ridge and First Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oak Ridge and First Business
The main advantage of trading using opposite Oak Ridge and First Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oak Ridge position performs unexpectedly, First Business 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 First Business will offset losses from the drop in First Business' long position.| Oak Ridge vs. HUMANA INC | Oak Ridge vs. SCOR PK | Oak Ridge vs. Aquagold International | Oak Ridge vs. Thrivent High Yield |
| First Business vs. Affinity Bancshares | First Business vs. Southern California Bancorp | First Business vs. Auburn National Bancorporation | First Business vs. BayCom Corp |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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