Correlation Between Oak Valley and Southern First
Can any of the company-specific risk be diversified away by investing in both Oak Valley and Southern First 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 Southern First 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 Southern First Bancshares, you can compare the effects of market volatilities on Oak Valley and Southern First 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 Southern First. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oak Valley and Southern First.
Diversification Opportunities for Oak Valley and Southern First
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Oak and Southern is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Oak Valley Bancorp and Southern First Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern First Bancshares 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 Southern First. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern First Bancshares has no effect on the direction of Oak Valley i.e., Oak Valley and Southern First go up and down completely randomly.
Pair Corralation between Oak Valley and Southern First
Given the investment horizon of 90 days Oak Valley Bancorp is expected to generate 0.87 times more return on investment than Southern First. However, Oak Valley Bancorp is 1.15 times less risky than Southern First. It trades about 0.05 of its potential returns per unit of risk. Southern First Bancshares is currently generating about 0.0 per unit of risk. If you would invest 1,910 in Oak Valley Bancorp on August 23, 2024 and sell it today you would earn a total of 1,107 from holding Oak Valley Bancorp or generate 57.96% 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. Southern First Bancshares
Performance |
| Timeline |
| Oak Valley Bancorp |
| Southern First Bancshares |
Oak Valley and Southern First Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oak Valley and Southern First
The main advantage of trading using opposite Oak Valley and Southern First positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oak Valley position performs unexpectedly, Southern First 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 Southern First will offset losses from the drop in Southern First's 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 |
| Southern First vs. First Community | Southern First vs. Old Point Financial | Southern First vs. Oak Valley Bancorp | Southern First vs. Chemung Financial Corp |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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