Correlation Between Home Bancorp and Oak Valley

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

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

Diversification Opportunities for Home Bancorp and Oak Valley

0.89

Correlation Coefficient

Home Bancorp  Oak Valley

Very poor diversification

The 3 months correlation between Home and Oak is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Home Bancorp and Oak Valley Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oak Valley Bancorp and Home 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 Home Bancorp are associated (or correlated) with Oak Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oak Valley Bancorp has no effect on the direction of Home Bancorp i.e., Home Bancorp and Oak Valley go up and down completely randomly.

Pair Corralation between Home Bancorp and Oak Valley

Given the investment horizon of 90 days Home Bancorp is expected to generate 1.06 times less return on investment than Oak Valley. In addition to that, Home Bancorp is 1.04 times more volatile than Oak Valley Bancorp. It trades about 0.03 of its total potential returns per unit of risk. Oak Valley Bancorp is currently generating about 0.03 per unit of volatility. If you would invest  2,201  in Oak Valley Bancorp on September 20, 2024 and sell it today you would earn a total of  560.00  from holding Oak Valley Bancorp or generate 25.44% return on investment over 90 days.

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

Home Bancorp  vs.  Oak Valley Bancorp

Home Bancorp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Home Bancorp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting fundamental indicators, Home Bancorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Oak Valley Bancorp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Oak Valley Bancorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Oak Valley is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Home Bancorp and Oak Valley

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

The idea behind Home Bancorp and Oak Valley 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 Stocks Directory module to find actively traded stocks across global markets.