Correlation Between Oak Valley and Bank of Botetourt
Can any of the company-specific risk be diversified away by investing in both Oak Valley and Bank of Botetourt 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 Oak Valley and Bank of Botetourt into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oak Valley Bancorp and Bank of Botetourt, you can compare the effects of market volatilities on Oak Valley and Bank of Botetourt 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 Oak Valley with a short position of Bank of Botetourt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oak Valley and Bank of Botetourt.
Diversification Opportunities for Oak Valley and Bank of Botetourt
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Oak and Bank is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Oak Valley Bancorp and Bank of Botetourt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Botetourt and Oak Valley 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 Oak Valley Bancorp are associated (or correlated) with Bank of Botetourt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Botetourt has no effect on the direction of Oak Valley i.e., Oak Valley and Bank of Botetourt go up and down completely randomly.
Pair Corralation between Oak Valley and Bank of Botetourt
Given the investment horizon of 90 days Oak Valley Bancorp is expected to generate 3.95 times more return on investment than Bank of Botetourt. However, Oak Valley is 3.95 times more volatile than Bank of Botetourt. It trades about 0.3 of its potential returns per unit of risk. Bank of Botetourt is currently generating about 0.19 per unit of risk. If you would invest 2,700 in Oak Valley Bancorp on September 1, 2024 and sell it today you would earn a total of 416.00 from holding Oak Valley Bancorp or generate 15.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oak Valley Bancorp vs. Bank of Botetourt
Performance |
| Timeline |
| Oak Valley Bancorp |
| Bank of Botetourt |
Oak Valley and Bank of Botetourt Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oak Valley and Bank of Botetourt
The main advantage of trading using opposite Oak Valley and Bank of Botetourt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oak Valley position performs unexpectedly, Bank of Botetourt 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 Bank of Botetourt will offset losses from the drop in Bank of Botetourt's long position.| Oak Valley vs. Affinity Bancshares | Oak Valley vs. Southern California Bancorp | Oak Valley vs. Auburn National Bancorporation | Oak Valley vs. BayCom Corp |
| Bank of Botetourt vs. Century Financial Corp | Bank of Botetourt vs. FS Bancorp | Bank of Botetourt vs. Lyons Bancorp | Bank of Botetourt vs. Solvay Bank 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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