Correlation Between Orange County and Finward Bancorp

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

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

Diversification Opportunities for Orange County and Finward Bancorp

0.12

Correlation Coefficient

Orange County  Finward Bancorp

Average diversification

The 3 months correlation between Orange and Finward is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Orange County Bancorp and Finward Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finward Bancorp and Orange County 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 Orange County Bancorp are associated (or correlated) with Finward Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finward Bancorp has no effect on the direction of Orange County i.e., Orange County and Finward Bancorp go up and down completely randomly.

Pair Corralation between Orange County and Finward Bancorp

Considering the 90-day investment horizon Orange County is expected to generate 1.88 times less return on investment than Finward Bancorp. In addition to that, Orange County is 1.73 times more volatile than Finward Bancorp. It trades about 0.04 of its total potential returns per unit of risk. Finward Bancorp is currently generating about 0.13 per unit of volatility. If you would invest  2,716  in Finward Bancorp on September 5, 2024 and sell it today you would earn a total of  385.00  from holding Finward Bancorp or generate 14.18% return on investment over 90 days.

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

Orange County Bancorp  vs.  Finward Bancorp

Orange County Bancorp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Orange County Bancorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental drivers, Orange County may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Finward Bancorp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Finward Bancorp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Finward Bancorp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Orange County and Finward Bancorp

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

The idea behind Orange County Bancorp and Finward 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.