Correlation Between First Ottawa and Potomac Bancshares
Can any of the company-specific risk be diversified away by investing in both First Ottawa and Potomac 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 First Ottawa and Potomac Bancshares 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 Potomac Bancshares, you can compare the effects of market volatilities on First Ottawa and Potomac 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 First Ottawa with a short position of Potomac Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Ottawa and Potomac Bancshares.
Diversification Opportunities for First Ottawa and Potomac Bancshares
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Potomac is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding First Ottawa Bancshares and Potomac Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Potomac Bancshares 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 Potomac Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Potomac Bancshares has no effect on the direction of First Ottawa i.e., First Ottawa and Potomac Bancshares go up and down completely randomly.
Pair Corralation between First Ottawa and Potomac Bancshares
Given the investment horizon of 90 days First Ottawa Bancshares is expected to generate 0.67 times more return on investment than Potomac Bancshares. However, First Ottawa Bancshares is 1.49 times less risky than Potomac Bancshares. It trades about 0.04 of its potential returns per unit of risk. Potomac Bancshares is currently generating about 0.0 per unit of risk. If you would invest 9,835 in First Ottawa Bancshares on August 26, 2024 and sell it today you would earn a total of 2,166 from holding First Ottawa Bancshares or generate 22.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 80.18% |
| Values | Daily Returns |
First Ottawa Bancshares vs. Potomac Bancshares
Performance |
| Timeline |
| First Ottawa Bancshares |
| Potomac Bancshares |
First Ottawa and Potomac Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Ottawa and Potomac Bancshares
The main advantage of trading using opposite First Ottawa and Potomac Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Ottawa position performs unexpectedly, Potomac 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 Potomac Bancshares will offset losses from the drop in Potomac Bancshares' 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 |
| Potomac Bancshares vs. Invesco High Income | Potomac Bancshares vs. Blackrock Muniholdings Ny | Potomac Bancshares vs. MFS Investment Grade | Potomac Bancshares vs. Federated Premier Municipal |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
Other Complementary Tools
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Equity Valuation Check real value of public entities based on technical and fundamental data |