Correlation Between First Bancorp and Oconee Financial
Can any of the company-specific risk be diversified away by investing in both First Bancorp and Oconee Financial 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 First Bancorp and Oconee Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Bancorp and Oconee Financial, you can compare the effects of market volatilities on First Bancorp and Oconee Financial 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 First Bancorp with a short position of Oconee Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Bancorp and Oconee Financial.
Diversification Opportunities for First Bancorp and Oconee Financial
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Oconee is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding First Bancorp and Oconee Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oconee Financial and First Bancorp 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 First Bancorp are associated (or correlated) with Oconee Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oconee Financial has no effect on the direction of First Bancorp i.e., First Bancorp and Oconee Financial go up and down completely randomly.
Pair Corralation between First Bancorp and Oconee Financial
Given the investment horizon of 90 days First Bancorp is expected to generate 1.19 times less return on investment than Oconee Financial. In addition to that, First Bancorp is 2.58 times more volatile than Oconee Financial. It trades about 0.04 of its total potential returns per unit of risk. Oconee Financial is currently generating about 0.12 per unit of volatility. If you would invest 3,050 in Oconee Financial on September 14, 2024 and sell it today you would earn a total of 950.00 from holding Oconee Financial or generate 31.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Bancorp vs. Oconee Financial
Performance |
| Timeline |
| First Bancorp |
| Oconee Financial |
First Bancorp and Oconee Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Bancorp and Oconee Financial
The main advantage of trading using opposite First Bancorp and Oconee Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Bancorp position performs unexpectedly, Oconee Financial 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 Oconee Financial will offset losses from the drop in Oconee Financial's long position.| First Bancorp vs. LINKBANCORP | First Bancorp vs. Bankwell Financial Group | First Bancorp vs. FS Bancorp | First Bancorp vs. Finward Bancorp |
| Oconee Financial vs. Pioneer Bankcorp | Oconee Financial vs. Liberty Northwest Bancorp | Oconee Financial vs. First Community | Oconee Financial vs. Coeur dAlene Bancorp |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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