Correlation Between Dime Community and OceanFirst Financial

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

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

Diversification Opportunities for Dime Community and OceanFirst Financial

0.88

Correlation Coefficient

Dime Community  OceanFirst Financial

Very poor diversification

The 3 months correlation between Dime and OceanFirst is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Dime Community Bancshares and OceanFirst Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OceanFirst Financial Corp and Dime Community 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 Dime Community Bancshares are associated (or correlated) with OceanFirst Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OceanFirst Financial Corp has no effect on the direction of Dime Community i.e., Dime Community and OceanFirst Financial go up and down completely randomly.

Pair Corralation between Dime Community and OceanFirst Financial

Given the investment horizon of 90 days Dime Community Bancshares is expected to under-perform the OceanFirst Financial. In addition to that, Dime Community is 1.33 times more volatile than OceanFirst Financial Corp. It trades about -0.12 of its total potential returns per unit of risk. OceanFirst Financial Corp is currently generating about -0.15 per unit of volatility. If you would invest  2,045  in OceanFirst Financial Corp on November 29, 2024 and sell it today you would lose (278.00) from holding OceanFirst Financial Corp or give up 13.59% of portfolio value over 90 days.

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

Dime Community Bancshares  vs.  OceanFirst Financial Corp

Dime Community Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dime Community Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

OceanFirst Financial Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days OceanFirst Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Dime Community and OceanFirst Financial

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

The idea behind Dime Community Bancshares and OceanFirst Financial Corp 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.