Correlation Between Oak Valley and Evans Bancorp

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

Diversification Opportunities for Oak Valley and Evans Bancorp

0.73

Correlation Coefficient

Oak Valley  Evans Bancorp

Poor diversification

The 3 months correlation between Oak and Evans is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Oak Valley Bancorp and Evans Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evans Bancorp 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 Evans Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evans Bancorp has no effect on the direction of Oak Valley i.e., Oak Valley and Evans Bancorp go up and down completely randomly.

Pair Corralation between Oak Valley and Evans Bancorp

Given the investment horizon of 90 days Oak Valley Bancorp is expected to under-perform the Evans Bancorp. In addition to that, Oak Valley is 1.27 times more volatile than Evans Bancorp. It trades about -0.11 of its total potential returns per unit of risk. Evans Bancorp is currently generating about -0.08 per unit of volatility. If you would invest  4,288  in Evans Bancorp on December 27, 2024 and sell it today you would lose (348.00) from holding Evans Bancorp or give up 8.12% of portfolio value over 90 days.

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

Oak Valley Bancorp  vs.  Evans Bancorp

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.

Evans Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Evans Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental drivers remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Oak Valley and Evans Bancorp

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

The idea behind Oak Valley Bancorp and Evans 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.