Correlation Between Southern States and Orange County
Can any of the company-specific risk be diversified away by investing in both Southern States and Orange County 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 Southern States and Orange County into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern States Bancshares and Orange County Bancorp, you can compare the effects of market volatilities on Southern States and Orange County 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 Southern States with a short position of Orange County. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern States and Orange County.
Diversification Opportunities for Southern States and Orange County
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Southern and Orange is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Southern States Bancshares and Orange County Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orange County Bancorp and Southern States 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 Southern States Bancshares are associated (or correlated) with Orange County. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orange County Bancorp has no effect on the direction of Southern States i.e., Southern States and Orange County go up and down completely randomly.
Pair Corralation between Southern States and Orange County
Given the investment horizon of 90 days Southern States Bancshares is expected to generate 1.18 times more return on investment than Orange County. However, Southern States is 1.18 times more volatile than Orange County Bancorp. It trades about 0.19 of its potential returns per unit of risk. Orange County Bancorp is currently generating about 0.04 per unit of risk. If you would invest 3,215 in Southern States Bancshares on August 29, 2024 and sell it today you would earn a total of 527.00 from holding Southern States Bancshares or generate 16.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southern States Bancshares vs. Orange County Bancorp
Performance |
| Timeline |
| Southern States Banc |
| Orange County Bancorp |
Southern States and Orange County Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern States and Orange County
The main advantage of trading using opposite Southern States and Orange County positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern States position performs unexpectedly, Orange County 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 Orange County will offset losses from the drop in Orange County's long position.| Southern States vs. Home Federal Bancorp | Southern States vs. Oak Valley Bancorp | Southern States vs. Mainstreet Bank | Southern States vs. Chemung Financial Corp |
| Orange County vs. Fifth Third Bancorp | Orange County vs. Huntington Bancshares Incorporated | Orange County vs. MT Bank |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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