Correlation Between Oak Ridge and Farmers Bancorp

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

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

Diversification Opportunities for Oak Ridge and Farmers Bancorp

0.89

Correlation Coefficient

Oak Ridge  Farmers Bancorp

Very poor diversification

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

Pair Corralation between Oak Ridge and Farmers Bancorp

Given the investment horizon of 90 days Oak Ridge Financial is expected to generate 0.93 times more return on investment than Farmers Bancorp. However, Oak Ridge Financial is 1.07 times less risky than Farmers Bancorp. It trades about 0.09 of its potential returns per unit of risk. Farmers Bancorp is currently generating about -0.02 per unit of risk. If you would invest  1,609  in Oak Ridge Financial on October 6, 2024 and sell it today you would earn a total of  461.00  from holding Oak Ridge Financial or generate 28.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	91.82%
Values	Daily Returns

Oak Ridge Financial  vs.  Farmers Bancorp

Oak Ridge Financial

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oak Ridge Financial are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Oak Ridge may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Farmers Bancorp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Farmers Bancorp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating fundamental drivers, Farmers Bancorp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Oak Ridge and Farmers Bancorp

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

The idea behind Oak Ridge Financial and Farmers Bancorp 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.

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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.