Correlation Between US Century and Orange County

Can any of the company-specific risk be diversified away by investing in both US Century and Orange County 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 US Century and Orange County into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between US Century Bank and Orange County Bancorp, you can compare the effects of market volatilities on US Century and Orange County 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 US Century with a short position of Orange County. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Century and Orange County.

Diversification Opportunities for US Century and Orange County

-0.14

Correlation Coefficient

US Century  Orange County

Good diversification

The 3 months correlation between USCB and Orange is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding US Century Bank and Orange County Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orange County Bancorp and US Century 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 US Century Bank are associated (or correlated) with Orange County. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orange County Bancorp has no effect on the direction of US Century i.e., US Century and Orange County go up and down completely randomly.

Pair Corralation between US Century and Orange County

Given the investment horizon of 90 days US Century Bank is expected to generate 1.16 times more return on investment than Orange County. However, US Century is 1.16 times more volatile than Orange County Bancorp. It trades about 0.07 of its potential returns per unit of risk. Orange County Bancorp is currently generating about -0.11 per unit of risk. If you would invest  1,762  in US Century Bank on December 27, 2024 and sell it today you would earn a total of  131.00  from holding US Century Bank or generate 7.43% return on investment over 90 days.

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

US Century Bank  vs.  Orange County Bancorp

US Century Bank

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in US Century Bank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, US Century may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Orange County Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Orange County Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's fundamental drivers remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with US Century and Orange County

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

The idea behind US Century Bank and Orange County 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.