Correlation Between International Bancshares and Ohio Valley
Can any of the company-specific risk be diversified away by investing in both International Bancshares and Ohio 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 International Bancshares and Ohio Valley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Bancshares and Ohio Valley Banc, you can compare the effects of market volatilities on International Bancshares and Ohio 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 International Bancshares with a short position of Ohio Valley. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Bancshares and Ohio Valley.
Diversification Opportunities for International Bancshares and Ohio Valley
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between International and Ohio is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding International Bancshares and Ohio Valley Banc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ohio Valley Banc and International Bancshares 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 International Bancshares are associated (or correlated) with Ohio Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ohio Valley Banc has no effect on the direction of International Bancshares i.e., International Bancshares and Ohio Valley go up and down completely randomly.
Pair Corralation between International Bancshares and Ohio Valley
Given the investment horizon of 90 days International Bancshares is expected to generate 15.08 times less return on investment than Ohio Valley. But when comparing it to its historical volatility, International Bancshares is 24.08 times less risky than Ohio Valley. It trades about 0.07 of its potential returns per unit of risk. Ohio Valley Banc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,446 in Ohio Valley Banc on September 5, 2024 and sell it today you would earn a total of 234.00 from holding Ohio Valley Banc or generate 9.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.38% |
| Values | Daily Returns |
International Bancshares vs. Ohio Valley Banc
Performance |
| Timeline |
| International Bancshares |
| Ohio Valley Banc |
International Bancshares and Ohio Valley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Bancshares and Ohio Valley
The main advantage of trading using opposite International Bancshares and Ohio Valley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Bancshares position performs unexpectedly, Ohio 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 Ohio Valley will offset losses from the drop in Ohio Valley's long position.The idea behind International Bancshares and Ohio Valley Banc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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