Correlation Between First Community and Oregon Bancorp

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

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

Diversification Opportunities for First Community and Oregon Bancorp

0.74

Correlation Coefficient

First Community  Oregon Bancorp

Poor diversification

The 3 months correlation between First and Oregon is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding First Community Financial and Oregon Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oregon Bancorp and First 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 First Community Financial 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 First Community i.e., First Community and Oregon Bancorp go up and down completely randomly.

Pair Corralation between First Community and Oregon Bancorp

Given the investment horizon of 90 days First Community Financial is expected to generate 1.96 times more return on investment than Oregon Bancorp. However, First Community is 1.96 times more volatile than Oregon Bancorp. It trades about -0.1 of its potential returns per unit of risk. Oregon Bancorp is currently generating about -0.22 per unit of risk. If you would invest  1,204  in First Community Financial on December 19, 2024 and sell it today you would lose (179.00) from holding First Community Financial or give up 14.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.22%
Values	Daily Returns

First Community Financial  vs.  Oregon Bancorp

First Community Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Community Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Oregon Bancorp

Risk-Adjusted Performance

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 inconsistent performance in the last few months, the Stock's fundamental drivers remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with First Community and Oregon Bancorp

The main advantage of trading using opposite First Community and Oregon Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Community 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 First Community Financial 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.