Correlation Between Southern California and First Business
Can any of the company-specific risk be diversified away by investing in both Southern California and First Business 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 Southern California and First Business into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern California Bancorp and First Business Financial, you can compare the effects of market volatilities on Southern California and First Business 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 Southern California with a short position of First Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern California and First Business.
Diversification Opportunities for Southern California and First Business
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Southern and First is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Southern California Bancorp and First Business Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Business Financial and Southern California 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 Southern California Bancorp are associated (or correlated) with First Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Business Financial has no effect on the direction of Southern California i.e., Southern California and First Business go up and down completely randomly.
Pair Corralation between Southern California and First Business
Given the investment horizon of 90 days Southern California Bancorp is expected to generate 0.77 times more return on investment than First Business. However, Southern California Bancorp is 1.3 times less risky than First Business. It trades about 0.42 of its potential returns per unit of risk. First Business Financial is currently generating about 0.26 per unit of risk. If you would invest 1,454 in Southern California Bancorp on September 3, 2024 and sell it today you would earn a total of 338.00 from holding Southern California Bancorp or generate 23.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southern California Bancorp vs. First Business Financial
Performance |
| Timeline |
| Southern California |
| First Business Financial |
Southern California and First Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern California and First Business
The main advantage of trading using opposite Southern California and First Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern California position performs unexpectedly, First Business 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 First Business will offset losses from the drop in First Business' long position.| Southern California vs. Avidbank Holdings | Southern California vs. American Riviera Bank | Southern California vs. American Business Bk | Southern California vs. Private Bancorp of |
| First Business vs. JPMorgan Chase Co | First Business vs. Citigroup | First Business vs. Wells Fargo | First Business vs. Toronto Dominion Bank |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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