Correlation Between Oak Valley and Home Federal
Can any of the company-specific risk be diversified away by investing in both Oak Valley and Home Federal 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 Home Federal 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 Home Federal Bancorp, you can compare the effects of market volatilities on Oak Valley and Home Federal 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 Home Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oak Valley and Home Federal.
Diversification Opportunities for Oak Valley and Home Federal
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Oak and Home is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Oak Valley Bancorp and Home Federal Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Federal Bancorp 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 Home Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Federal Bancorp has no effect on the direction of Oak Valley i.e., Oak Valley and Home Federal go up and down completely randomly.
Pair Corralation between Oak Valley and Home Federal
Given the investment horizon of 90 days Oak Valley Bancorp is expected to generate 0.93 times more return on investment than Home Federal. However, Oak Valley Bancorp is 1.08 times less risky than Home Federal. It trades about 0.3 of its potential returns per unit of risk. Home Federal Bancorp is currently generating about -0.03 per unit of risk. If you would invest 2,719 in Oak Valley Bancorp on August 27, 2024 and sell it today you would earn a total of 421.00 from holding Oak Valley Bancorp or generate 15.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 90.48% |
| Values | Daily Returns |
Oak Valley Bancorp vs. Home Federal Bancorp
Performance |
| Timeline |
| Oak Valley Bancorp |
| Home Federal Bancorp |
Oak Valley and Home Federal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oak Valley and Home Federal
The main advantage of trading using opposite Oak Valley and Home Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oak Valley position performs unexpectedly, Home Federal 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 Home Federal will offset losses from the drop in Home Federal's long position.| Oak Valley vs. Fifth Third Bancorp | Oak Valley vs. Zions Bancorporation | Oak Valley vs. Huntington Bancshares Incorporated | Oak Valley vs. Comerica |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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