Correlation Between OFG Bancorp and BOK Financial

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

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

Diversification Opportunities for OFG Bancorp and BOK Financial

0.62

Correlation Coefficient

OFG Bancorp  BOK Financial

Poor diversification

The 3 months correlation between OFG and BOK is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding OFG Bancorp and BOK Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BOK Financial and OFG 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 OFG Bancorp are associated (or correlated) with BOK Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BOK Financial has no effect on the direction of OFG Bancorp i.e., OFG Bancorp and BOK Financial go up and down completely randomly.

Pair Corralation between OFG Bancorp and BOK Financial

Considering the 90-day investment horizon OFG Bancorp is expected to generate 1.24 times less return on investment than BOK Financial. In addition to that, OFG Bancorp is 1.13 times more volatile than BOK Financial. It trades about 0.06 of its total potential returns per unit of risk. BOK Financial is currently generating about 0.09 per unit of volatility. If you would invest  8,983  in BOK Financial on September 29, 2024 and sell it today you would earn a total of  1,837  from holding BOK Financial or generate 20.45% return on investment over 90 days.

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

OFG Bancorp  vs.  BOK Financial

OFG Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days OFG Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, OFG Bancorp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

BOK Financial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BOK Financial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward-looking signals, BOK Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with OFG Bancorp and BOK Financial

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

The idea behind OFG Bancorp and BOK 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.