Correlation Between Independent Bank and Oak Valley
Can any of the company-specific risk be diversified away by investing in both Independent Bank and Oak Valley 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 Independent Bank and Oak Valley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Independent Bank and Oak Valley Bancorp, you can compare the effects of market volatilities on Independent Bank and Oak Valley 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 Independent Bank with a short position of Oak Valley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Independent Bank and Oak Valley.
Diversification Opportunities for Independent Bank and Oak Valley
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Independent and Oak is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Independent Bank and Oak Valley Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oak Valley Bancorp and Independent Bank 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 Independent Bank are associated (or correlated) with Oak Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oak Valley Bancorp has no effect on the direction of Independent Bank i.e., Independent Bank and Oak Valley go up and down completely randomly.
Pair Corralation between Independent Bank and Oak Valley
Given the investment horizon of 90 days Independent Bank is expected to generate 1.54 times more return on investment than Oak Valley. However, Independent Bank is 1.54 times more volatile than Oak Valley Bancorp. It trades about 0.2 of its potential returns per unit of risk. Oak Valley Bancorp is currently generating about 0.26 per unit of risk. If you would invest 3,293 in Independent Bank on August 29, 2024 and sell it today you would earn a total of 535.00 from holding Independent Bank or generate 16.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Independent Bank vs. Oak Valley Bancorp
Performance |
| Timeline |
| Independent Bank |
| Oak Valley Bancorp |
Independent Bank and Oak Valley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Independent Bank and Oak Valley
The main advantage of trading using opposite Independent Bank and Oak Valley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Independent Bank position performs unexpectedly, Oak Valley 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 Oak Valley will offset losses from the drop in Oak Valley's long position.| Independent Bank vs. First Northwest Bancorp | Independent Bank vs. Community West Bancshares | Independent Bank vs. First Financial Northwest | Independent Bank vs. Great Southern Bancorp |
| Oak Valley vs. Fifth Third Bancorp | Oak Valley vs. Huntington Bancshares Incorporated | Oak Valley vs. MT Bank |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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