Correlation Between OceanFirst Financial and First Keystone

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

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

Diversification Opportunities for OceanFirst Financial and First Keystone

0.8

Correlation Coefficient

OceanFirst Financial  First Keystone

Very poor diversification

The 3 months correlation between OceanFirst and First is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding OceanFirst Financial Corp and First Keystone Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Keystone Corp and OceanFirst Financial 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 OceanFirst Financial Corp are associated (or correlated) with First Keystone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Keystone Corp has no effect on the direction of OceanFirst Financial i.e., OceanFirst Financial and First Keystone go up and down completely randomly.

Pair Corralation between OceanFirst Financial and First Keystone

Assuming the 90 days horizon OceanFirst Financial is expected to generate 7.93 times less return on investment than First Keystone. But when comparing it to its historical volatility, OceanFirst Financial Corp is 7.11 times less risky than First Keystone. It trades about 0.13 of its potential returns per unit of risk. First Keystone Corp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,218  in First Keystone Corp on September 4, 2024 and sell it today you would earn a total of  382.00  from holding First Keystone Corp or generate 31.36% return on investment over 90 days.

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

OceanFirst Financial Corp  vs.  First Keystone Corp

OceanFirst Financial Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in OceanFirst Financial Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, OceanFirst Financial is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

First Keystone Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Keystone Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, First Keystone unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with OceanFirst Financial and First Keystone

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

The idea behind OceanFirst Financial Corp and First Keystone Corp 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.