Correlation Between Oregon Pacific and Farmers Bank

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

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

Diversification Opportunities for Oregon Pacific and Farmers Bank

0.59

Correlation Coefficient

Oregon Pacific  Farmers Bank

Very weak diversification

The 3 months correlation between Oregon and Farmers is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Oregon Pacific Bancorp and The Farmers Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmers Bank and Oregon Pacific 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 Oregon Pacific Bancorp are associated (or correlated) with Farmers Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmers Bank has no effect on the direction of Oregon Pacific i.e., Oregon Pacific and Farmers Bank go up and down completely randomly.

Pair Corralation between Oregon Pacific and Farmers Bank

Given the investment horizon of 90 days Oregon Pacific is expected to generate 2.34 times less return on investment than Farmers Bank. But when comparing it to its historical volatility, Oregon Pacific Bancorp is 1.64 times less risky than Farmers Bank. It trades about 0.01 of its potential returns per unit of risk. The Farmers Bank is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,300  in The Farmers Bank on December 29, 2024 and sell it today you would earn a total of  25.00  from holding The Farmers Bank or generate 1.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Oregon Pacific Bancorp  vs.  The Farmers Bank

Oregon Pacific Bancorp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Oregon Pacific Bancorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Oregon Pacific is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Farmers Bank

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Farmers Bank are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Farmers Bank is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Oregon Pacific and Farmers Bank

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

The idea behind Oregon Pacific Bancorp and The Farmers Bank 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.