Correlation Between Stock Yards and Old Point

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

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

Diversification Opportunities for Stock Yards and Old Point

0.78

Correlation Coefficient

Stock Yards  Old Point

Poor diversification

The 3 months correlation between Stock and Old is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Stock Yards Bancorp and Old Point Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Point Financial and Stock Yards 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 Stock Yards Bancorp are associated (or correlated) with Old Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Point Financial has no effect on the direction of Stock Yards i.e., Stock Yards and Old Point go up and down completely randomly.

Pair Corralation between Stock Yards and Old Point

Given the investment horizon of 90 days Stock Yards Bancorp is expected to under-perform the Old Point. But the stock apears to be less risky and, when comparing its historical volatility, Stock Yards Bancorp is 1.51 times less risky than Old Point. The stock trades about -0.18 of its potential returns per unit of risk. The Old Point Financial is currently generating about 0.27 of returns per unit of risk over similar time horizon. 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 Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Stock Yards Bancorp  vs.  Old Point Financial

Stock Yards Bancorp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stock Yards Bancorp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental drivers, Stock Yards unveiled solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Stock Yards and Old Point

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

The idea behind Stock Yards Bancorp and Old Point Financial 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.