Correlation Between Oak Valley and CF Bankshares
Can any of the company-specific risk be diversified away by investing in both Oak Valley and CF Bankshares 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 CF Bankshares 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 CF Bankshares, you can compare the effects of market volatilities on Oak Valley and CF Bankshares 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 CF Bankshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oak Valley and CF Bankshares.
Diversification Opportunities for Oak Valley and CF Bankshares
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Oak and CFBK is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Oak Valley Bancorp and CF Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Bankshares 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 CF Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Bankshares has no effect on the direction of Oak Valley i.e., Oak Valley and CF Bankshares go up and down completely randomly.
Pair Corralation between Oak Valley and CF Bankshares
Given the investment horizon of 90 days Oak Valley Bancorp is expected to generate 0.86 times more return on investment than CF Bankshares. However, Oak Valley Bancorp is 1.16 times less risky than CF Bankshares. It trades about 0.26 of its potential returns per unit of risk. CF Bankshares is currently generating about 0.16 per unit of risk. If you would invest 2,719 in Oak Valley Bancorp on August 29, 2024 and sell it today you would earn a total of 378.00 from holding Oak Valley Bancorp or generate 13.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oak Valley Bancorp vs. CF Bankshares
Performance |
| Timeline |
| Oak Valley Bancorp |
| CF Bankshares |
Oak Valley and CF Bankshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oak Valley and CF Bankshares
The main advantage of trading using opposite Oak Valley and CF Bankshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oak Valley position performs unexpectedly, CF Bankshares 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 CF Bankshares will offset losses from the drop in CF Bankshares' long position.| Oak Valley vs. Fifth Third Bancorp | Oak Valley vs. Huntington Bancshares Incorporated | Oak Valley vs. MT Bank |
| CF Bankshares vs. Magyar Bancorp | CF Bankshares vs. Home Federal Bancorp | CF Bankshares vs. Community West Bancshares | CF Bankshares vs. First Financial Northwest |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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