Correlation Between Plumas Bancorp and Oak Valley
Can any of the company-specific risk be diversified away by investing in both Plumas Bancorp and Oak Valley 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 Plumas Bancorp and Oak Valley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Plumas Bancorp and Oak Valley Bancorp, you can compare the effects of market volatilities on Plumas Bancorp and Oak Valley 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 Plumas Bancorp with a short position of Oak Valley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Plumas Bancorp and Oak Valley.
Diversification Opportunities for Plumas Bancorp and Oak Valley
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Plumas and Oak is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Plumas Bancorp and Oak Valley Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oak Valley Bancorp and Plumas Bancorp 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 Plumas Bancorp are associated (or correlated) with Oak Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oak Valley Bancorp has no effect on the direction of Plumas Bancorp i.e., Plumas Bancorp and Oak Valley go up and down completely randomly.
Pair Corralation between Plumas Bancorp and Oak Valley
Given the investment horizon of 90 days Plumas Bancorp is expected to generate 0.96 times more return on investment than Oak Valley. However, Plumas Bancorp is 1.04 times less risky than Oak Valley. It trades about 0.1 of its potential returns per unit of risk. Oak Valley Bancorp is currently generating about 0.08 per unit of risk. If you would invest 3,370 in Plumas Bancorp on September 1, 2024 and sell it today you would earn a total of 1,576 from holding Plumas Bancorp or generate 46.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Plumas Bancorp vs. Oak Valley Bancorp
Performance |
| Timeline |
| Plumas Bancorp |
| Oak Valley Bancorp |
Plumas Bancorp and Oak Valley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Plumas Bancorp and Oak Valley
The main advantage of trading using opposite Plumas Bancorp and Oak Valley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plumas Bancorp position performs unexpectedly, Oak Valley 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 Oak Valley will offset losses from the drop in Oak Valley's long position.| Plumas Bancorp vs. Home Federal Bancorp | Plumas Bancorp vs. First Northwest Bancorp | Plumas Bancorp vs. Lake Shore Bancorp | Plumas Bancorp vs. Community West Bancshares |
| Oak Valley vs. Affinity Bancshares | Oak Valley vs. Southern California Bancorp | Oak Valley vs. Auburn National Bancorporation | Oak Valley vs. BayCom 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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