Correlation Between National Capital and Oregon Bancorp

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

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

Diversification Opportunities for National Capital and Oregon Bancorp

0.31

Correlation Coefficient

National Capital  Oregon Bancorp

Weak diversification

The 3 months correlation between National and Oregon is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding National Capital Bank and Oregon Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oregon Bancorp and National Capital 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 National Capital Bank 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 National Capital i.e., National Capital and Oregon Bancorp go up and down completely randomly.

Pair Corralation between National Capital and Oregon Bancorp

Given the investment horizon of 90 days National Capital Bank is expected to generate 2.34 times more return on investment than Oregon Bancorp. However, National Capital is 2.34 times more volatile than Oregon Bancorp. It trades about -0.04 of its potential returns per unit of risk. Oregon Bancorp is currently generating about -0.22 per unit of risk. If you would invest  7,500  in National Capital Bank on December 20, 2024 and sell it today you would lose (700.00) from holding National Capital Bank or give up 9.33% of portfolio value over 90 days.

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

National Capital Bank  vs.  Oregon Bancorp

National Capital Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Capital Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company 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 National Capital and Oregon Bancorp

The main advantage of trading using opposite National Capital and Oregon Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Capital 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 National Capital Bank 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.