Correlation Between First Ottawa and OceanFirst Financial
Can any of the company-specific risk be diversified away by investing in both First Ottawa and OceanFirst 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 Ottawa and OceanFirst Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Ottawa Bancshares and OceanFirst Financial Corp, you can compare the effects of market volatilities on First Ottawa and OceanFirst 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 Ottawa with a short position of OceanFirst Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Ottawa and OceanFirst Financial.
Diversification Opportunities for First Ottawa and OceanFirst Financial
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and OceanFirst is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding First Ottawa Bancshares and OceanFirst Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OceanFirst Financial Corp and First Ottawa 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 Ottawa Bancshares are associated (or correlated) with OceanFirst Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OceanFirst Financial Corp has no effect on the direction of First Ottawa i.e., First Ottawa and OceanFirst Financial go up and down completely randomly.
Pair Corralation between First Ottawa and OceanFirst Financial
Given the investment horizon of 90 days First Ottawa Bancshares is expected to generate 1.3 times more return on investment than OceanFirst Financial. However, First Ottawa is 1.3 times more volatile than OceanFirst Financial Corp. It trades about 0.29 of its potential returns per unit of risk. OceanFirst Financial Corp is currently generating about 0.11 per unit of risk. If you would invest 11,585 in First Ottawa Bancshares on September 1, 2024 and sell it today you would earn a total of 416.00 from holding First Ottawa Bancshares or generate 3.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Ottawa Bancshares vs. OceanFirst Financial Corp
Performance |
| Timeline |
| First Ottawa Bancshares |
| OceanFirst Financial Corp |
First Ottawa and OceanFirst Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Ottawa and OceanFirst Financial
The main advantage of trading using opposite First Ottawa and OceanFirst Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Ottawa position performs unexpectedly, OceanFirst 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 OceanFirst Financial will offset losses from the drop in OceanFirst Financial's long position.| First Ottawa vs. Century Next Financial | First Ottawa vs. Citizens Financial Corp | First Ottawa vs. Triad Business Bank | First Ottawa vs. First Bankers Trustshares |
| OceanFirst Financial vs. KeyCorp | OceanFirst Financial vs. KeyCorp | OceanFirst Financial vs. Fifth Third Bancorp | OceanFirst Financial vs. Citizens Financial Group |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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