Correlation Between VeriSign and Oakworth Capital

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

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

Diversification Opportunities for VeriSign and Oakworth Capital

0.79

Correlation Coefficient

VeriSign  Oakworth Capital

Poor diversification

The 3 months correlation between VeriSign and Oakworth is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding VeriSign and Oakworth Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oakworth Capital and VeriSign 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 VeriSign are associated (or correlated) with Oakworth Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oakworth Capital has no effect on the direction of VeriSign i.e., VeriSign and Oakworth Capital go up and down completely randomly.

Pair Corralation between VeriSign and Oakworth Capital

Given the investment horizon of 90 days VeriSign is expected to generate 1.26 times less return on investment than Oakworth Capital. But when comparing it to its historical volatility, VeriSign is 1.49 times less risky than Oakworth Capital. It trades about 0.13 of its potential returns per unit of risk. Oakworth Capital is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,914  in Oakworth Capital on October 24, 2024 and sell it today you would earn a total of  436.00  from holding Oakworth Capital or generate 14.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.77%
Values	Daily Returns

VeriSign  vs.  Oakworth Capital

VeriSign

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VeriSign are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, VeriSign may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Oakworth Capital

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oakworth Capital are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting forward-looking signals, Oakworth Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VeriSign and Oakworth Capital

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

The idea behind VeriSign and Oakworth 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.

Check out your portfolio center.

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.