Correlation Between First Ottawa and CompoSecure

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

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

Diversification Opportunities for First Ottawa and CompoSecure

0.78

Correlation Coefficient

First Ottawa  CompoSecure

Poor diversification

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

Pair Corralation between First Ottawa and CompoSecure

Given the investment horizon of 90 days First Ottawa is expected to generate 4.07 times less return on investment than CompoSecure. But when comparing it to its historical volatility, First Ottawa Bancshares is 2.03 times less risky than CompoSecure. It trades about 0.09 of its potential returns per unit of risk. CompoSecure is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,156  in CompoSecure on May 8, 2025 and sell it today you would earn a total of  268.00  from holding CompoSecure or generate 23.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

First Ottawa Bancshares  vs.  CompoSecure

First Ottawa Bancshares

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in First Ottawa Bancshares are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, First Ottawa is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

CompoSecure

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CompoSecure are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, CompoSecure displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Ottawa and CompoSecure

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

The idea behind First Ottawa Bancshares and CompoSecure 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.