Correlation Between Old National and Peoples Bancorp

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

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

Diversification Opportunities for Old National and Peoples Bancorp

0.71

Correlation Coefficient

Old National  Peoples Bancorp

Poor diversification

The 3 months correlation between Old and Peoples is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Old National Bancorp and Peoples Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peoples Bancorp and Old National 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 Old National Bancorp are associated (or correlated) with Peoples Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peoples Bancorp has no effect on the direction of Old National i.e., Old National and Peoples Bancorp go up and down completely randomly.

Pair Corralation between Old National and Peoples Bancorp

Considering the 90-day investment horizon Old National Bancorp is expected to generate 1.37 times more return on investment than Peoples Bancorp. However, Old National is 1.37 times more volatile than Peoples Bancorp. It trades about 0.04 of its potential returns per unit of risk. Peoples Bancorp is currently generating about -0.05 per unit of risk. If you would invest  2,093  in Old National Bancorp on December 19, 2024 and sell it today you would earn a total of  67.00  from holding Old National Bancorp or generate 3.2% return on investment over 90 days.

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

Old National Bancorp  vs.  Peoples Bancorp

Old National Bancorp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Old National Bancorp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Old National is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Peoples Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Peoples Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, Peoples Bancorp is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Old National and Peoples Bancorp

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

The idea behind Old National Bancorp and Peoples 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.