Correlation Between Old Point and Finward Bancorp

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

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

Diversification Opportunities for Old Point and Finward Bancorp

-0.7

Correlation Coefficient

Old Point  Finward Bancorp

Excellent diversification

The 3 months correlation between Old and Finward is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Old Point Financial and Finward Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finward Bancorp and Old Point 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 Old Point Financial 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 Old Point i.e., Old Point and Finward Bancorp go up and down completely randomly.

Pair Corralation between Old Point and Finward Bancorp

Given the investment horizon of 90 days Old Point Financial is expected to generate 1.6 times more return on investment than Finward Bancorp. However, Old Point is 1.6 times more volatile than Finward Bancorp. It trades about 0.27 of its potential returns per unit of risk. Finward Bancorp is currently generating about -0.21 per unit of risk. If you would invest  2,206  in Old Point Financial on September 28, 2024 and sell it today you would earn a total of  309.00  from holding Old Point Financial or generate 14.01% return on investment over 90 days.

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

Old Point Financial  vs.  Finward Bancorp

Old Point Financial

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Old Point Financial are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Old Point reported solid returns over the last few months and may actually be approaching a breakup point.

Finward Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Finward Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Old Point and Finward Bancorp

The main advantage of trading using opposite Old Point and Finward Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Old Point 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 Old Point Financial 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.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..