Correlation Between OceanFirst Financial and US Bancorp

Can any of the company-specific risk be diversified away by investing in both OceanFirst Financial and US 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 OceanFirst Financial and US Bancorp 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 US Bancorp, you can compare the effects of market volatilities on OceanFirst Financial and US 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 OceanFirst Financial with a short position of US Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of OceanFirst Financial and US Bancorp.

Diversification Opportunities for OceanFirst Financial and US Bancorp

-0.81

Correlation Coefficient

OceanFirst Financial  US Bancorp

Pay attention - limited upside

The 3 months correlation between OceanFirst and USB-PS is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding OceanFirst Financial Corp and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp 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 US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of OceanFirst Financial i.e., OceanFirst Financial and US Bancorp go up and down completely randomly.

Pair Corralation between OceanFirst Financial and US Bancorp

Assuming the 90 days horizon OceanFirst Financial Corp is expected to generate 0.54 times more return on investment than US Bancorp. However, OceanFirst Financial Corp is 1.85 times less risky than US Bancorp. It trades about 0.07 of its potential returns per unit of risk. US Bancorp is currently generating about -0.1 per unit of risk. If you would invest  2,479  in OceanFirst Financial Corp on September 14, 2024 and sell it today you would earn a total of  45.00  from holding OceanFirst Financial Corp or generate 1.82% return on investment over 90 days.

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

OceanFirst Financial Corp  vs.  US Bancorp

OceanFirst Financial Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in OceanFirst Financial Corp are ranked lower than 5 (%) 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.

US Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, US Bancorp is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with OceanFirst Financial and US Bancorp

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

The idea behind OceanFirst Financial Corp and US 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.