Correlation Between Third Coast and Orange County

Can any of the company-specific risk be diversified away by investing in both Third Coast and Orange County 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 Third Coast and Orange County into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Third Coast Bancshares and Orange County Bancorp, you can compare the effects of market volatilities on Third Coast and Orange County 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 Third Coast with a short position of Orange County. Check out your portfolio center. Please also check ongoing floating volatility patterns of Third Coast and Orange County.

Diversification Opportunities for Third Coast and Orange County

0.48

Correlation Coefficient

Third Coast  Orange County

Very weak diversification

The 3 months correlation between Third and Orange is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Third Coast Bancshares and Orange County Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orange County Bancorp and Third Coast 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 Third Coast Bancshares are associated (or correlated) with Orange County. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orange County Bancorp has no effect on the direction of Third Coast i.e., Third Coast and Orange County go up and down completely randomly.

Pair Corralation between Third Coast and Orange County

Given the investment horizon of 90 days Third Coast Bancshares is expected to generate 0.67 times more return on investment than Orange County. However, Third Coast Bancshares is 1.5 times less risky than Orange County. It trades about 0.26 of its potential returns per unit of risk. Orange County Bancorp is currently generating about 0.04 per unit of risk. If you would invest  2,539  in Third Coast Bancshares on September 4, 2024 and sell it today you would earn a total of  984.00  from holding Third Coast Bancshares or generate 38.76% return on investment over 90 days.

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

Third Coast Bancshares  vs.  Orange County Bancorp

Third Coast Bancshares

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Third Coast Bancshares are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Third Coast showed solid returns over the last few months and may actually be approaching a breakup point.

Orange County Bancorp

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Orange County Bancorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting fundamental drivers, Orange County may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Third Coast and Orange County

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

The idea behind Third Coast Bancshares and Orange County 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.

Check out your portfolio center.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.