Correlation Between Oak Valley and Bank

Can any of the company-specific risk be diversified away by investing in both Oak Valley and 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 Oak Valley and Bank 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 Bank, you can compare the effects of market volatilities on Oak Valley and 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 Oak Valley with a short position of Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oak Valley and Bank.

Diversification Opportunities for Oak Valley and Bank

0.32

Correlation Coefficient

Oak Valley  Bank

Weak diversification

The 3 months correlation between Oak and Bank is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Oak Valley Bancorp and Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank 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 Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank has no effect on the direction of Oak Valley i.e., Oak Valley and Bank go up and down completely randomly.

Pair Corralation between Oak Valley and Bank

If you would invest  2,589  in Oak Valley Bancorp on September 2, 2024 and sell it today you would earn a total of  527.00  from holding Oak Valley Bancorp or generate 20.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

Oak Valley Bancorp  vs.  Bank

Oak Valley Bancorp

Risk-Adjusted Performance

11 of 100

Good

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

Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Bank is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Oak Valley and Bank

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

The idea behind Oak Valley Bancorp and 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..