Correlation Between Banner and Live Oak

Can any of the company-specific risk be diversified away by investing in both Banner and Live Oak 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 Banner and Live Oak into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Banner and Live Oak Bancshares, you can compare the effects of market volatilities on Banner and Live Oak 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 Banner with a short position of Live Oak. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banner and Live Oak.

Diversification Opportunities for Banner and Live Oak

0.89

Correlation Coefficient

Banner  Live Oak

Very poor diversification

The 3 months correlation between Banner and Live is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Banner and Live Oak Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Live Oak Bancshares and Banner 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 Banner are associated (or correlated) with Live Oak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Live Oak Bancshares has no effect on the direction of Banner i.e., Banner and Live Oak go up and down completely randomly.

Pair Corralation between Banner and Live Oak

Given the investment horizon of 90 days Banner is expected to generate 0.82 times more return on investment than Live Oak. However, Banner is 1.22 times less risky than Live Oak. It trades about 0.08 of its potential returns per unit of risk. Live Oak Bancshares is currently generating about 0.03 per unit of risk. If you would invest  6,274  in Banner on October 25, 2024 and sell it today you would earn a total of  743.00  from holding Banner or generate 11.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Banner  vs.  Live Oak Bancshares

Banner

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Banner are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Banner reported solid returns over the last few months and may actually be approaching a breakup point.

Live Oak Bancshares

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Live Oak Bancshares are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Live Oak is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Banner and Live Oak

The main advantage of trading using opposite Banner and Live Oak positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banner position performs unexpectedly, Live Oak 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 Live Oak will offset losses from the drop in Live Oak's long position.

The idea behind Banner and Live Oak Bancshares pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.