Correlation Between Orange County and Ames National
Can any of the company-specific risk be diversified away by investing in both Orange County and Ames National 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 Orange County and Ames National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Orange County Bancorp and Ames National, you can compare the effects of market volatilities on Orange County and Ames National 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 Orange County with a short position of Ames National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orange County and Ames National.
Diversification Opportunities for Orange County and Ames National
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Orange and Ames is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Orange County Bancorp and Ames National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ames National and Orange County 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 Orange County Bancorp are associated (or correlated) with Ames National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ames National has no effect on the direction of Orange County i.e., Orange County and Ames National go up and down completely randomly.
Pair Corralation between Orange County and Ames National
Considering the 90-day investment horizon Orange County Bancorp is expected to generate 1.58 times more return on investment than Ames National. However, Orange County is 1.58 times more volatile than Ames National. It trades about 0.06 of its potential returns per unit of risk. Ames National is currently generating about -0.02 per unit of risk. If you would invest 4,867 in Orange County Bancorp on August 25, 2024 and sell it today you would earn a total of 1,083 from holding Orange County Bancorp or generate 22.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Orange County Bancorp vs. Ames National
Performance |
| Timeline |
| Orange County Bancorp |
| Ames National |
Orange County and Ames National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Orange County and Ames National
The main advantage of trading using opposite Orange County and Ames National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orange County position performs unexpectedly, Ames National 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 Ames National will offset losses from the drop in Ames National's long position.| Orange County vs. Southern States Bancshares | Orange County vs. US Century Bank | Orange County vs. Third Coast Bancshares | Orange County vs. Esquire Financial Holdings |
| Ames National vs. First Community | Ames National vs. Old Point Financial | Ames National vs. Oak Valley Bancorp | Ames National vs. Chemung Financial Corp |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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