Correlation Between Oak Valley and ST Bancorp
Can any of the company-specific risk be diversified away by investing in both Oak Valley and ST Bancorp 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 ST Bancorp 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 ST Bancorp, you can compare the effects of market volatilities on Oak Valley and ST Bancorp 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 ST Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oak Valley and ST Bancorp.
Diversification Opportunities for Oak Valley and ST Bancorp
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Oak and STBA is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Oak Valley Bancorp and ST Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ST 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 ST Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ST Bancorp has no effect on the direction of Oak Valley i.e., Oak Valley and ST Bancorp go up and down completely randomly.
Pair Corralation between Oak Valley and ST Bancorp
Given the investment horizon of 90 days Oak Valley Bancorp is expected to generate 0.69 times more return on investment than ST Bancorp. However, Oak Valley Bancorp is 1.46 times less risky than ST Bancorp. It trades about 0.27 of its potential returns per unit of risk. ST Bancorp is currently generating about 0.18 per unit of risk. If you would invest 2,672 in Oak Valley Bancorp on August 25, 2024 and sell it today you would earn a total of 399.00 from holding Oak Valley Bancorp or generate 14.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oak Valley Bancorp vs. ST Bancorp
Performance |
| Timeline |
| Oak Valley Bancorp |
| ST Bancorp |
Oak Valley and ST Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oak Valley and ST Bancorp
The main advantage of trading using opposite Oak Valley and ST Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oak Valley position performs unexpectedly, ST Bancorp 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 ST Bancorp will offset losses from the drop in ST Bancorp'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 |
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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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