Correlation Between Dime Community and Bank Ozk

Can any of the company-specific risk be diversified away by investing in both Dime Community and Bank Ozk 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 Bank Ozk 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 Bank Ozk Preferred, you can compare the effects of market volatilities on Dime Community and Bank Ozk 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 Bank Ozk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dime Community and Bank Ozk.

Diversification Opportunities for Dime Community and Bank Ozk

0.17

Correlation Coefficient

Dime Community  Bank Ozk

Average diversification

The 3 months correlation between Dime and Bank is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Dime Community Bancshares and Bank Ozk Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Ozk Preferred 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 Bank Ozk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Ozk Preferred has no effect on the direction of Dime Community i.e., Dime Community and Bank Ozk go up and down completely randomly.

Pair Corralation between Dime Community and Bank Ozk

Assuming the 90 days horizon Dime Community is expected to generate 1.22 times less return on investment than Bank Ozk. But when comparing it to its historical volatility, Dime Community Bancshares is 1.16 times less risky than Bank Ozk. It trades about 0.09 of its potential returns per unit of risk. Bank Ozk Preferred is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,582  in Bank Ozk Preferred on December 27, 2024 and sell it today you would earn a total of  97.00  from holding Bank Ozk Preferred or generate 6.13% return on investment over 90 days.

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

Dime Community Bancshares  vs.  Bank Ozk Preferred

Dime Community Bancshares

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dime Community Bancshares are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable primary indicators, Dime Community is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Bank Ozk Preferred

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Ozk Preferred are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Bank Ozk may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Dime Community and Bank Ozk

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

The idea behind Dime Community Bancshares and Bank Ozk Preferred 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.