Correlation Between Overseas Chinese and Pinnacle Bancshares

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

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

Diversification Opportunities for Overseas Chinese and Pinnacle Bancshares

0.3

Correlation Coefficient

Overseas Chinese  Pinnacle Bancshares

Weak diversification

The 3 months correlation between Overseas and Pinnacle is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Overseas Chinese Banking and Pinnacle Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinnacle Bancshares and Overseas Chinese 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 Overseas Chinese Banking are associated (or correlated) with Pinnacle Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinnacle Bancshares has no effect on the direction of Overseas Chinese i.e., Overseas Chinese and Pinnacle Bancshares go up and down completely randomly.

Pair Corralation between Overseas Chinese and Pinnacle Bancshares

Assuming the 90 days horizon Overseas Chinese Banking is expected to generate 0.6 times more return on investment than Pinnacle Bancshares. However, Overseas Chinese Banking is 1.65 times less risky than Pinnacle Bancshares. It trades about 0.08 of its potential returns per unit of risk. Pinnacle Bancshares is currently generating about -0.09 per unit of risk. If you would invest  1,607  in Overseas Chinese Banking on August 31, 2024 and sell it today you would earn a total of  784.00  from holding Overseas Chinese Banking or generate 48.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	7.88%
Values	Daily Returns

Overseas Chinese Banking  vs.  Pinnacle Bancshares

Overseas Chinese Banking

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Overseas Chinese Banking are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical indicators, Overseas Chinese may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pinnacle Bancshares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pinnacle Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Pinnacle Bancshares is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Overseas Chinese and Pinnacle Bancshares

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

The idea behind Overseas Chinese Banking and Pinnacle Bancshares 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.