Correlation Between FNCB Bancorp and Orrstown Financial

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

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

Diversification Opportunities for FNCB Bancorp and Orrstown Financial

0.0

Correlation Coefficient

FNCB Bancorp  Orrstown Financial

Pay attention - limited upside

The 3 months correlation between FNCB and Orrstown is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding FNCB Bancorp and Orrstown Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orrstown Financial and FNCB Bancorp 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 FNCB Bancorp are associated (or correlated) with Orrstown Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orrstown Financial has no effect on the direction of FNCB Bancorp i.e., FNCB Bancorp and Orrstown Financial go up and down completely randomly.

Pair Corralation between FNCB Bancorp and Orrstown Financial

If you would invest (100.00) in FNCB Bancorp on December 19, 2024 and sell it today you would earn a total of  100.00  from holding FNCB Bancorp or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

FNCB Bancorp  vs.  Orrstown Financial Services

FNCB Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days FNCB Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, FNCB Bancorp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Orrstown Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Orrstown Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with FNCB Bancorp and Orrstown Financial

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

The idea behind FNCB Bancorp and Orrstown Financial Services 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.