Correlation Between MT Bank and Oak Valley
Can any of the company-specific risk be diversified away by investing in both MT 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 MT 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 MT Bank and Oak Valley Bancorp, you can compare the effects of market volatilities on MT 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 MT Bank with a short position of Oak Valley. Check out your portfolio center. Please also check ongoing floating volatility patterns of MT Bank and Oak Valley.
Diversification Opportunities for MT Bank and Oak Valley
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between MTB and Oak is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding MT 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 MT 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 MT 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 MT Bank i.e., MT Bank and Oak Valley go up and down completely randomly.
Pair Corralation between MT Bank and Oak Valley
Considering the 90-day investment horizon MT Bank is expected to generate 0.84 times more return on investment than Oak Valley. However, MT Bank is 1.19 times less risky than Oak Valley. It trades about 0.09 of its potential returns per unit of risk. Oak Valley Bancorp is currently generating about 0.04 per unit of risk. If you would invest 12,273 in MT Bank on August 31, 2024 and sell it today you would earn a total of 9,726 from holding MT Bank or generate 79.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
MT Bank vs. Oak Valley Bancorp
Performance |
| Timeline |
| MT Bank |
| Oak Valley Bancorp |
MT Bank and Oak Valley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MT Bank and Oak Valley
The main advantage of trading using opposite MT Bank and Oak Valley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MT 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.| MT Bank vs. US Bancorp | MT Bank vs. Truist Financial Corp | MT Bank vs. Fifth Third Bancorp | MT Bank vs. KeyCorp |
| Oak Valley vs. Home Federal Bancorp | Oak Valley vs. Lake Shore Bancorp | Oak Valley vs. Community West Bancshares | Oak Valley vs. Magyar 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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