Correlation Between Sound Financial and Oak Valley
Can any of the company-specific risk be diversified away by investing in both Sound Financial 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 Sound Financial and Oak Valley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sound Financial Bancorp and Oak Valley Bancorp, you can compare the effects of market volatilities on Sound Financial 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 Sound Financial with a short position of Oak Valley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sound Financial and Oak Valley.
Diversification Opportunities for Sound Financial and Oak Valley
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sound and Oak is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Sound Financial 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 Sound Financial 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 Sound Financial 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 Sound Financial i.e., Sound Financial and Oak Valley go up and down completely randomly.
Pair Corralation between Sound Financial and Oak Valley
Given the investment horizon of 90 days Sound Financial Bancorp is expected to generate 0.53 times more return on investment than Oak Valley. However, Sound Financial Bancorp is 1.89 times less risky than Oak Valley. It trades about -0.2 of its potential returns per unit of risk. Oak Valley Bancorp is currently generating about -0.16 per unit of risk. If you would invest 5,498 in Sound Financial Bancorp on November 3, 2024 and sell it today you would lose (212.00) from holding Sound Financial Bancorp or give up 3.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sound Financial Bancorp vs. Oak Valley Bancorp
Performance |
| Timeline |
| Sound Financial Bancorp |
| Oak Valley Bancorp |
Sound Financial and Oak Valley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sound Financial and Oak Valley
The main advantage of trading using opposite Sound Financial and Oak Valley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sound Financial 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.| Sound Financial vs. Finward Bancorp | Sound Financial vs. Franklin Financial Services | Sound Financial vs. Community West Bancshares | Sound Financial vs. Home Federal Bancorp |
| Oak Valley vs. Home Federal Bancorp | Oak Valley vs. Lake Shore Bancorp | Oak Valley vs. Community West Bancshares | Oak Valley vs. Magyar 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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