Correlation Between Nicolet Bankshares and Old Second

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

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

Diversification Opportunities for Nicolet Bankshares and Old Second

0.29

Correlation Coefficient

Nicolet Bankshares  Old Second

Modest diversification

The 3 months correlation between Nicolet and Old is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Nicolet Bankshares and Old Second Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Second Bancorp and Nicolet Bankshares 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 Nicolet Bankshares are associated (or correlated) with Old Second. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Second Bancorp has no effect on the direction of Nicolet Bankshares i.e., Nicolet Bankshares and Old Second go up and down completely randomly.

Pair Corralation between Nicolet Bankshares and Old Second

Considering the 90-day investment horizon Nicolet Bankshares is expected to generate 2.11 times less return on investment than Old Second. In addition to that, Nicolet Bankshares is 1.15 times more volatile than Old Second Bancorp. It trades about 0.04 of its total potential returns per unit of risk. Old Second Bancorp is currently generating about 0.09 per unit of volatility. If you would invest  1,338  in Old Second Bancorp on February 29, 2024 and sell it today you would earn a total of  101.00  from holding Old Second Bancorp or generate 7.55% return on investment over 90 days.

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

Nicolet Bankshares  vs.  Old Second Bancorp

Nicolet Bankshares

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nicolet Bankshares are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, Nicolet Bankshares is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Old Second Bancorp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Old Second Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, Old Second may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Nicolet Bankshares and Old Second

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

The idea behind Nicolet Bankshares and Old Second 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.