Correlation Between Greenville Federal and First Ottawa

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

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

Diversification Opportunities for Greenville Federal and First Ottawa

0.3

Correlation Coefficient

Greenville Federal  First Ottawa

Weak diversification

The 3 months correlation between Greenville and First is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Greenville Federal Financial and First Ottawa Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Ottawa Bancshares and Greenville Federal 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 Greenville Federal Financial are associated (or correlated) with First Ottawa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Ottawa Bancshares has no effect on the direction of Greenville Federal i.e., Greenville Federal and First Ottawa go up and down completely randomly.

Pair Corralation between Greenville Federal and First Ottawa

Given the investment horizon of 90 days Greenville Federal Financial is expected to under-perform the First Ottawa. But the pink sheet apears to be less risky and, when comparing its historical volatility, Greenville Federal Financial is 2.8 times less risky than First Ottawa. The pink sheet trades about -0.05 of its potential returns per unit of risk. The First Ottawa Bancshares is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  13,000  in First Ottawa Bancshares on December 29, 2024 and sell it today you would earn a total of  2,700  from holding First Ottawa Bancshares or generate 20.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Greenville Federal Financial  vs.  First Ottawa Bancshares

Greenville Federal

Risk-Adjusted Performance

Weak

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

First Ottawa Bancshares

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Ottawa Bancshares are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, First Ottawa sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Greenville Federal and First Ottawa

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

The idea behind Greenville Federal Financial and First Ottawa Bancshares 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.