Correlation Between Ohio Valley and Old Second

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

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

Diversification Opportunities for Ohio Valley and Old Second

-0.56

Correlation Coefficient

Ohio Valley  Old Second

Excellent diversification

The 3 months correlation between Ohio and Old is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Ohio Valley Banc and Old Second Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Second Bancorp and Ohio Valley 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 Ohio Valley Banc are associated (or correlated) with Old Second. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Second Bancorp has no effect on the direction of Ohio Valley i.e., Ohio Valley and Old Second go up and down completely randomly.

Pair Corralation between Ohio Valley and Old Second

Given the investment horizon of 90 days Ohio Valley Banc is expected to generate 1.7 times more return on investment than Old Second. However, Ohio Valley is 1.7 times more volatile than Old Second Bancorp. It trades about 0.09 of its potential returns per unit of risk. Old Second Bancorp is currently generating about -0.07 per unit of risk. If you would invest  2,532  in Ohio Valley Banc on December 26, 2024 and sell it today you would earn a total of  284.00  from holding Ohio Valley Banc or generate 11.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Ohio Valley Banc  vs.  Old Second Bancorp

Ohio Valley Banc

Risk-Adjusted Performance

Modest

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

Old Second Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Old Second Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Old Second is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ohio Valley and Old Second

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

The idea behind Ohio Valley Banc and Old Second 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.