Correlation Between Oak Valley and BOC Hong

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

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

Diversification Opportunities for Oak Valley and BOC Hong

-0.23

Correlation Coefficient

Oak Valley  BOC Hong

Very good diversification

The 3 months correlation between Oak and BOC is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Oak Valley Bancorp and BOC Hong Kong in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BOC Hong Kong and Oak 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 Oak Valley Bancorp are associated (or correlated) with BOC Hong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BOC Hong Kong has no effect on the direction of Oak Valley i.e., Oak Valley and BOC Hong go up and down completely randomly.

Pair Corralation between Oak Valley and BOC Hong

Given the investment horizon of 90 days Oak Valley Bancorp is expected to under-perform the BOC Hong. In addition to that, Oak Valley is 1.52 times more volatile than BOC Hong Kong. It trades about -0.09 of its total potential returns per unit of risk. BOC Hong Kong is currently generating about 0.15 per unit of volatility. If you would invest  6,175  in BOC Hong Kong on December 1, 2024 and sell it today you would earn a total of  845.00  from holding BOC Hong Kong or generate 13.68% return on investment over 90 days.

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

Oak Valley Bancorp  vs.  BOC Hong Kong

Oak Valley Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Oak Valley Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

BOC Hong Kong

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BOC Hong Kong are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, BOC Hong showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oak Valley and BOC Hong

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

The idea behind Oak Valley Bancorp and BOC Hong Kong 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.