Correlation Between Old Point and Oak Ridge
Can any of the company-specific risk be diversified away by investing in both Old Point and Oak Ridge 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 Point and Oak Ridge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Old Point Financial and Oak Ridge Financial, you can compare the effects of market volatilities on Old Point and Oak Ridge 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 Point with a short position of Oak Ridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Old Point and Oak Ridge.
Diversification Opportunities for Old Point and Oak Ridge
Very poor diversification
The 3 months correlation between Old and Oak is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Old Point Financial and Oak Ridge Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oak Ridge Financial and Old Point 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 Point Financial are associated (or correlated) with Oak Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oak Ridge Financial has no effect on the direction of Old Point i.e., Old Point and Oak Ridge go up and down completely randomly.
Pair Corralation between Old Point and Oak Ridge
Given the investment horizon of 90 days Old Point Financial is expected to generate 1.44 times more return on investment than Oak Ridge. However, Old Point is 1.44 times more volatile than Oak Ridge Financial. It trades about 0.49 of its potential returns per unit of risk. Oak Ridge Financial is currently generating about 0.41 per unit of risk. If you would invest 1,982 in Old Point Financial on September 1, 2024 and sell it today you would earn a total of 270.00 from holding Old Point Financial or generate 13.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Old Point Financial vs. Oak Ridge Financial
Performance |
| Timeline |
| Old Point Financial |
| Oak Ridge Financial |
Old Point and Oak Ridge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Old Point and Oak Ridge
The main advantage of trading using opposite Old Point and Oak Ridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Old Point position performs unexpectedly, Oak Ridge 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 Ridge will offset losses from the drop in Oak Ridge's long position.| Old Point vs. Affinity Bancshares | Old Point vs. Southern California Bancorp | Old Point vs. Auburn National Bancorporation | Old Point vs. BayCom Corp |
| Oak Ridge vs. HUMANA INC | Oak Ridge vs. SCOR PK | Oak Ridge vs. Aquagold International | Oak Ridge vs. Thrivent High Yield |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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