Correlation Between Oak Valley and National Bankshares
Can any of the company-specific risk be diversified away by investing in both Oak Valley and National 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 National 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 National Bankshares, you can compare the effects of market volatilities on Oak Valley and National 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 National Bankshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oak Valley and National Bankshares.
Diversification Opportunities for Oak Valley and National Bankshares
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Oak and National is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Oak Valley Bancorp and National Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National 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 National Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bankshares has no effect on the direction of Oak Valley i.e., Oak Valley and National Bankshares go up and down completely randomly.
Pair Corralation between Oak Valley and National Bankshares
Given the investment horizon of 90 days Oak Valley Bancorp is expected to under-perform the National Bankshares. But the stock apears to be less risky and, when comparing its historical volatility, Oak Valley Bancorp is 1.44 times less risky than National Bankshares. The stock trades about -0.16 of its potential returns per unit of risk. The National Bankshares is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,794 in National Bankshares on November 3, 2024 and sell it today you would earn a total of 145.00 from holding National Bankshares or generate 5.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Oak Valley Bancorp vs. National Bankshares
Performance |
| Timeline |
| Oak Valley Bancorp |
| National Bankshares |
Oak Valley and National Bankshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oak Valley and National Bankshares
The main advantage of trading using opposite Oak Valley and National Bankshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oak Valley position performs unexpectedly, National 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 National Bankshares will offset losses from the drop in National Bankshares' long position.| Oak Valley vs. Home Federal Bancorp | Oak Valley vs. Lake Shore Bancorp | Oak Valley vs. Community West Bancshares | Oak Valley vs. Magyar Bancorp |
| National Bankshares vs. Finward Bancorp | National Bankshares vs. Community West Bancshares | National Bankshares vs. First Financial Northwest | National Bankshares vs. Oak Valley Bancorp |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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