Correlation Between OFG Bancorp and Community Bank

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Can any of the company-specific risk be diversified away by investing in both OFG Bancorp and Community Bank 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 Community Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between OFG Bancorp and Community Bank System, you can compare the effects of market volatilities on OFG Bancorp and Community Bank 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 Community Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of OFG Bancorp and Community Bank.

Diversification Opportunities for OFG Bancorp and Community Bank

0.67
  Correlation Coefficient

Poor diversification

The 3 months correlation between OFG and Community is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding OFG Bancorp and Community Bank System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Bank System 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 Community Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Bank System has no effect on the direction of OFG Bancorp i.e., OFG Bancorp and Community Bank go up and down completely randomly.

Pair Corralation between OFG Bancorp and Community Bank

Considering the 90-day investment horizon OFG Bancorp is expected to generate 2.0 times less return on investment than Community Bank. But when comparing it to its historical volatility, OFG Bancorp is 1.11 times less risky than Community Bank. It trades about 0.06 of its potential returns per unit of risk. Community Bank System is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  4,619  in Community Bank System on September 29, 2024 and sell it today you would earn a total of  1,612  from holding Community Bank System or generate 34.9% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

OFG Bancorp  vs.  Community Bank System

 Performance 
       Timeline  
OFG Bancorp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
Community Bank System 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Community Bank System are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting fundamental drivers, Community Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

OFG Bancorp and Community Bank Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with OFG Bancorp and Community Bank

The main advantage of trading using opposite OFG Bancorp and Community Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OFG Bancorp position performs unexpectedly, Community Bank 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 Community Bank will offset losses from the drop in Community Bank's long position.
The idea behind OFG Bancorp and Community Bank System 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.
Check out your portfolio center.
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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