Correlation Between Orange County and Southern States

Can any of the company-specific risk be diversified away by investing in both Orange County and Southern States 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 Orange County and Southern States into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Orange County and Southern States

0.45

Correlation Coefficient

Orange County  Southern States

Very weak diversification

The 3 months correlation between Orange and Southern is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Orange County Bancorp and Southern States Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern States Banc and Orange County 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 Orange County Bancorp are associated (or correlated) with Southern States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern States Banc has no effect on the direction of Orange County i.e., Orange County and Southern States go up and down completely randomly.

Pair Corralation between Orange County and Southern States

Considering the 90-day investment horizon Orange County Bancorp is expected to under-perform the Southern States. In addition to that, Orange County is 1.0 times more volatile than Southern States Bancshares. It trades about -0.14 of its total potential returns per unit of risk. Southern States Bancshares is currently generating about -0.01 per unit of volatility. If you would invest  3,334  in Southern States Bancshares on December 29, 2024 and sell it today you would lose (69.00) from holding Southern States Bancshares or give up 2.07% of portfolio value over 90 days.

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

Orange County Bancorp  vs.  Southern States Bancshares

Orange County Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Orange County Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's fundamental drivers remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Southern States Banc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Southern States Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, Southern States is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Orange County and Southern States

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

The idea behind Orange County Bancorp and Southern States 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.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.