Correlation Between Oak Valley and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Oak Valley and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on Oak Valley and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oak Valley and Dow Jones.
Diversification Opportunities for Oak Valley and Dow Jones
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Oak and Dow is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Oak Valley Bancorp and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Oak Valley i.e., Oak Valley and Dow Jones go up and down completely randomly.
Pair Corralation between Oak Valley and Dow Jones
Given the investment horizon of 90 days Oak Valley Bancorp is expected to generate 3.24 times more return on investment than Dow Jones. However, Oak Valley is 3.24 times more volatile than Dow Jones Industrial. It trades about 0.04 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.11 per unit of risk. If you would invest 2,419 in Oak Valley Bancorp on August 28, 2024 and sell it today you would earn a total of 721.00 from holding Oak Valley Bancorp or generate 29.81% 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. Dow Jones Industrial
Performance |
| Timeline |
Oak Valley and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Oak Valley Bancorp
Pair trading matchups for Oak Valley
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Oak Valley and Dow Jones
The main advantage of trading using opposite Oak Valley and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oak Valley position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Oak Valley vs. Fifth Third Bancorp | Oak Valley vs. Huntington Bancshares Incorporated | Oak Valley vs. MT Bank |
| Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Western Acquisition Ventures | Dow Jones vs. Tyson Foods | Dow Jones vs. Inflection Point Acquisition |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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