Correlation Between Oak Valley and Sound Financial
Can any of the company-specific risk be diversified away by investing in both Oak Valley and Sound Financial 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 Sound Financial 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 Sound Financial Bancorp, you can compare the effects of market volatilities on Oak Valley and Sound Financial 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 Sound Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oak Valley and Sound Financial.
Diversification Opportunities for Oak Valley and Sound Financial
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Oak and Sound is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Oak Valley Bancorp and Sound Financial Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sound Financial 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 Sound Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sound Financial Bancorp has no effect on the direction of Oak Valley i.e., Oak Valley and Sound Financial go up and down completely randomly.
Pair Corralation between Oak Valley and Sound Financial
Given the investment horizon of 90 days Oak Valley Bancorp is expected to generate 1.53 times more return on investment than Sound Financial. However, Oak Valley is 1.53 times more volatile than Sound Financial Bancorp. It trades about 0.3 of its potential returns per unit of risk. Sound Financial Bancorp is currently generating about 0.01 per unit of risk. If you would invest 2,643 in Oak Valley Bancorp on August 26, 2024 and sell it today you would earn a total of 428.00 from holding Oak Valley Bancorp or generate 16.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oak Valley Bancorp vs. Sound Financial Bancorp
Performance |
| Timeline |
| Oak Valley Bancorp |
| Sound Financial Bancorp |
Oak Valley and Sound Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oak Valley and Sound Financial
The main advantage of trading using opposite Oak Valley and Sound Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oak Valley position performs unexpectedly, Sound Financial 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 Sound Financial will offset losses from the drop in Sound Financial's long position.| Oak Valley vs. Fifth Third Bancorp | Oak Valley vs. Zions Bancorporation | Oak Valley vs. Huntington Bancshares Incorporated | Oak Valley vs. PNC Financial Services |
| Sound Financial vs. Finward Bancorp | Sound Financial vs. Franklin Financial Services | Sound Financial vs. Community West Bancshares | Sound Financial vs. Home Federal 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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