Correlation Between Popular and OFG Bancorp

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

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

Diversification Opportunities for Popular and OFG Bancorp

0.77

Correlation Coefficient

Popular  OFG Bancorp

Poor diversification

The 3 months correlation between Popular and OFG is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Popular and OFG Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OFG Bancorp and Popular 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 Popular are associated (or correlated) with OFG Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OFG Bancorp has no effect on the direction of Popular i.e., Popular and OFG Bancorp go up and down completely randomly.

Pair Corralation between Popular and OFG Bancorp

Given the investment horizon of 90 days Popular is expected to generate 1.09 times more return on investment than OFG Bancorp. However, Popular is 1.09 times more volatile than OFG Bancorp. It trades about 0.0 of its potential returns per unit of risk. OFG Bancorp is currently generating about -0.04 per unit of risk. If you would invest  9,403  in Popular on December 27, 2024 and sell it today you would lose (83.00) from holding Popular or give up 0.88% of portfolio value over 90 days.

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

Popular  vs.  OFG Bancorp

Popular

Risk-Adjusted Performance

Very Weak

Over the last 90 days Popular has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Popular is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

OFG Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days OFG Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, OFG Bancorp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Popular and OFG Bancorp

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

The idea behind Popular and OFG 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.