Correlation Between Bank of South and Oregon Bancorp

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

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

Diversification Opportunities for Bank of South and Oregon Bancorp

0.06

Correlation Coefficient

Bank of South  Oregon Bancorp

Significant diversification

The 3 months correlation between Bank and Oregon is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Bank of South and Oregon Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oregon Bancorp and Bank of South 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 Bank of South are associated (or correlated) with Oregon Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oregon Bancorp has no effect on the direction of Bank of South i.e., Bank of South and Oregon Bancorp go up and down completely randomly.

Pair Corralation between Bank of South and Oregon Bancorp

Given the investment horizon of 90 days Bank of South is expected to under-perform the Oregon Bancorp. But the otc stock apears to be less risky and, when comparing its historical volatility, Bank of South is 1.63 times less risky than Oregon Bancorp. The otc stock trades about -0.06 of its potential returns per unit of risk. The Oregon Bancorp is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,835  in Oregon Bancorp on October 26, 2024 and sell it today you would lose (685.00) from holding Oregon Bancorp or give up 24.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	26.41%
Values	Daily Returns

Bank of South  vs.  Oregon Bancorp

Bank of South

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank of South has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Bank of South is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Oregon Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oregon Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, Oregon Bancorp is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Bank of South and Oregon Bancorp

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

The idea behind Bank of South and Oregon 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.

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