Correlation Between US Bancorp and OceanFirst Financial

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

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

Diversification Opportunities for US Bancorp and OceanFirst Financial

-0.69

Correlation Coefficient

US Bancorp  OceanFirst Financial

Excellent diversification

The 3 months correlation between USB-PH and OceanFirst is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding US Bancorp and OceanFirst Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OceanFirst Financial Corp and US Bancorp 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 US Bancorp are associated (or correlated) with OceanFirst Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OceanFirst Financial Corp has no effect on the direction of US Bancorp i.e., US Bancorp and OceanFirst Financial go up and down completely randomly.

Pair Corralation between US Bancorp and OceanFirst Financial

Assuming the 90 days trading horizon US Bancorp is expected to under-perform the OceanFirst Financial. In addition to that, US Bancorp is 4.56 times more volatile than OceanFirst Financial Corp. It trades about -0.07 of its total potential returns per unit of risk. OceanFirst Financial Corp is currently generating about 0.1 per unit of volatility. If you would invest  2,467  in OceanFirst Financial Corp on January 31, 2025 and sell it today you would earn a total of  27.00  from holding OceanFirst Financial Corp or generate 1.09% return on investment over 90 days.

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

US Bancorp  vs.  OceanFirst Financial Corp

US Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days US Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, US Bancorp is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

OceanFirst Financial Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in OceanFirst Financial Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, OceanFirst Financial is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with US Bancorp and OceanFirst Financial

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

The idea behind US Bancorp and OceanFirst Financial Corp 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.