Correlation Between Esquire Financial and Oak Valley

Can any of the company-specific risk be diversified away by investing in both Esquire Financial and Oak Valley 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 Esquire Financial and Oak Valley into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Esquire Financial and Oak Valley

0.49

Correlation Coefficient

Esquire Financial  Oak Valley

Very weak diversification

The 3 months correlation between Esquire and Oak is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Esquire Financial Holdings and Oak Valley Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oak Valley Bancorp and Esquire 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 Esquire Financial Holdings are associated (or correlated) with Oak Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oak Valley Bancorp has no effect on the direction of Esquire Financial i.e., Esquire Financial and Oak Valley go up and down completely randomly.

Pair Corralation between Esquire Financial and Oak Valley

Considering the 90-day investment horizon Esquire Financial Holdings is expected to generate 0.93 times more return on investment than Oak Valley. However, Esquire Financial Holdings is 1.07 times less risky than Oak Valley. It trades about 0.03 of its potential returns per unit of risk. Oak Valley Bancorp is currently generating about -0.05 per unit of risk. If you would invest  4,899  in Esquire Financial Holdings on February 8, 2024 and sell it today you would earn a total of  88.00  from holding Esquire Financial Holdings or generate 1.8% return on investment over 90 days.

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

Esquire Financial Holdings  vs.  Oak Valley Bancorp

Esquire Financial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Esquire Financial Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Esquire Financial may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Oak Valley Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Esquire Financial and Oak Valley

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

The idea behind Esquire Financial Holdings and Oak Valley 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.