Correlation Between Oak Valley and First Capital

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

Diversification Opportunities for Oak Valley and First Capital

-0.51

Correlation Coefficient

Oak Valley  First Capital

Excellent diversification

The 3 months correlation between Oak and First is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Oak Valley Bancorp and First Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Capital 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 First Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Capital has no effect on the direction of Oak Valley i.e., Oak Valley and First Capital go up and down completely randomly.

Pair Corralation between Oak Valley and First Capital

Given the investment horizon of 90 days Oak Valley Bancorp is expected to under-perform the First Capital. In addition to that, Oak Valley is 1.17 times more volatile than First Capital. It trades about -0.11 of its total potential returns per unit of risk. First Capital is currently generating about 0.17 per unit of volatility. If you would invest  3,200  in First Capital on December 27, 2024 and sell it today you would earn a total of  587.00  from holding First Capital or generate 18.34% return on investment over 90 days.

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

Oak Valley Bancorp  vs.  First Capital

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.

First Capital

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Capital are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, First Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oak Valley and First Capital

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

The idea behind Oak Valley Bancorp and First Capital 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.