Correlation Between Live Oak and CF Bankshares

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

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

Diversification Opportunities for Live Oak and CF Bankshares

0.86

Correlation Coefficient

Live Oak  CF Bankshares

Very poor diversification

The 3 months correlation between Live and CFBK is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Live Oak Bancshares and CF Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Bankshares and Live Oak 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 Live Oak Bancshares are associated (or correlated) with CF Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Bankshares has no effect on the direction of Live Oak i.e., Live Oak and CF Bankshares go up and down completely randomly.

Pair Corralation between Live Oak and CF Bankshares

Considering the 90-day investment horizon Live Oak is expected to generate 2.47 times less return on investment than CF Bankshares. In addition to that, Live Oak is 1.3 times more volatile than CF Bankshares. It trades about 0.02 of its total potential returns per unit of risk. CF Bankshares is currently generating about 0.05 per unit of volatility. If you would invest  1,920  in CF Bankshares on October 25, 2024 and sell it today you would earn a total of  381.00  from holding CF Bankshares or generate 19.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.02%
Values	Daily Returns

Live Oak Bancshares  vs.  CF Bankshares

Live Oak Bancshares

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Live Oak Bancshares are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Live Oak is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

CF Bankshares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CF Bankshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental drivers remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Live Oak and CF Bankshares

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

The idea behind Live Oak Bancshares and CF Bankshares 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.