Correlation Between Bank Ozk and Eq Energy

Can any of the company-specific risk be diversified away by investing in both Bank Ozk and Eq Energy 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 Bank Ozk and Eq Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bank Ozk and Eq Energy Drink, you can compare the effects of market volatilities on Bank Ozk and Eq Energy 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 Bank Ozk with a short position of Eq Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Ozk and Eq Energy.

Diversification Opportunities for Bank Ozk and Eq Energy

-0.54

Correlation Coefficient

Bank Ozk  Eq Energy

Excellent diversification

The 3 months correlation between Bank and EQLB is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Bank Ozk and Eq Energy Drink in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eq Energy Drink and Bank Ozk 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 Bank Ozk are associated (or correlated) with Eq Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eq Energy Drink has no effect on the direction of Bank Ozk i.e., Bank Ozk and Eq Energy go up and down completely randomly.

Pair Corralation between Bank Ozk and Eq Energy

Considering the 90-day investment horizon Bank Ozk is expected to generate 60.56 times less return on investment than Eq Energy. But when comparing it to its historical volatility, Bank Ozk is 11.07 times less risky than Eq Energy. It trades about 0.02 of its potential returns per unit of risk. Eq Energy Drink is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  0.08  in Eq Energy Drink on December 26, 2024 and sell it today you would earn a total of  0.05  from holding Eq Energy Drink or generate 62.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Bank Ozk  vs.  Eq Energy Drink

Bank Ozk

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Ozk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Bank Ozk is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Eq Energy Drink

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eq Energy Drink are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal essential indicators, Eq Energy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Ozk and Eq Energy

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

The idea behind Bank Ozk and Eq Energy Drink 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.