Correlation Between OceanFirst Financial and Columbia Financial

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

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

Diversification Opportunities for OceanFirst Financial and Columbia Financial

0.86

Correlation Coefficient

OceanFirst Financial  Columbia Financial

Very poor diversification

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

Pair Corralation between OceanFirst Financial and Columbia Financial

Given the investment horizon of 90 days OceanFirst Financial Corp is expected to generate 1.41 times more return on investment than Columbia Financial. However, OceanFirst Financial is 1.41 times more volatile than Columbia Financial. It trades about 0.08 of its potential returns per unit of risk. Columbia Financial is currently generating about -0.01 per unit of risk. If you would invest  1,757  in OceanFirst Financial Corp on September 14, 2024 and sell it today you would earn a total of  220.00  from holding OceanFirst Financial Corp or generate 12.52% return on investment over 90 days.

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

OceanFirst Financial Corp  vs.  Columbia Financial

OceanFirst Financial Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in OceanFirst Financial Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical and fundamental indicators, OceanFirst Financial exhibited solid returns over the last few months and may actually be approaching a breakup point.

Columbia Financial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with OceanFirst Financial and Columbia Financial

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

The idea behind OceanFirst Financial Corp and Columbia Financial 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.