Correlation Between Oak Valley and Newtek Business

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

Diversification Opportunities for Oak Valley and Newtek Business

0.78

Correlation Coefficient

Oak Valley  Newtek Business

Poor diversification

The 3 months correlation between Oak and Newtek is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Oak Valley Bancorp and Newtek Business Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newtek Business Services 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 Newtek Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newtek Business Services has no effect on the direction of Oak Valley i.e., Oak Valley and Newtek Business go up and down completely randomly.

Pair Corralation between Oak Valley and Newtek Business

Given the investment horizon of 90 days Oak Valley Bancorp is expected to generate 0.85 times more return on investment than Newtek Business. However, Oak Valley Bancorp is 1.18 times less risky than Newtek Business. It trades about 0.1 of its potential returns per unit of risk. Newtek Business Services is currently generating about -0.01 per unit of risk. If you would invest  2,705  in Oak Valley Bancorp on September 30, 2024 and sell it today you would earn a total of  265.00  from holding Oak Valley Bancorp or generate 9.8% return on investment over 90 days.

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

Oak Valley Bancorp  vs.  Newtek Business Services

Oak Valley Bancorp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Oak Valley Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting essential indicators, Oak Valley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Newtek Business Services

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Newtek Business Services are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Newtek Business may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Oak Valley and Newtek Business

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

The idea behind Oak Valley Bancorp and Newtek Business Services 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.