Correlation Between Old National and Potomac Bancshares
Can any of the company-specific risk be diversified away by investing in both Old National 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 Old National and Potomac Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Old National Bancorp and Potomac Bancshares, you can compare the effects of market volatilities on Old National 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 Old National with a short position of Potomac Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Old National and Potomac Bancshares.
Diversification Opportunities for Old National and Potomac Bancshares
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Old and Potomac is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Old National Bancorp and Potomac Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Potomac Bancshares and Old National 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 Old National Bancorp 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 Old National i.e., Old National and Potomac Bancshares go up and down completely randomly.
Pair Corralation between Old National and Potomac Bancshares
Considering the 90-day investment horizon Old National Bancorp is expected to generate 0.91 times more return on investment than Potomac Bancshares. However, Old National Bancorp is 1.09 times less risky than Potomac Bancshares. It trades about 0.09 of its potential returns per unit of risk. Potomac Bancshares is currently generating about 0.03 per unit of risk. If you would invest 1,317 in Old National Bancorp on September 2, 2024 and sell it today you would earn a total of 999.00 from holding Old National Bancorp or generate 75.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 84.41% |
| Values | Daily Returns |
Old National Bancorp vs. Potomac Bancshares
Performance |
| Timeline |
| Old National Bancorp |
| Potomac Bancshares |
Old National and Potomac Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Old National and Potomac Bancshares
The main advantage of trading using opposite Old National and Potomac Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Old National 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.| Old National vs. Independent Bank | Old National vs. First Financial Bancorp | Old National vs. Lakeland Financial | Old National vs. National Bank Holdings |
| Potomac Bancshares vs. Apollo Bancorp | Potomac Bancshares vs. The Farmers Bank | Potomac Bancshares vs. Community Bankers | Potomac Bancshares vs. CCSB 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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