Correlation Between First Community and Southern California
Can any of the company-specific risk be diversified away by investing in both First Community and Southern California 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 Community and Southern California into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Community and Southern California Bancorp, you can compare the effects of market volatilities on First Community and Southern California 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 Community with a short position of Southern California. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Community and Southern California.
Diversification Opportunities for First Community and Southern California
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Southern is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding First Community and Southern California Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern California and First Community 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 Community are associated (or correlated) with Southern California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern California has no effect on the direction of First Community i.e., First Community and Southern California go up and down completely randomly.
Pair Corralation between First Community and Southern California
Given the investment horizon of 90 days First Community is expected to generate 2.13 times less return on investment than Southern California. But when comparing it to its historical volatility, First Community is 1.45 times less risky than Southern California. It trades about 0.3 of its potential returns per unit of risk. Southern California Bancorp is currently generating about 0.44 of returns per unit of risk over similar time horizon. If you would invest 1,427 in Southern California Bancorp on August 28, 2024 and sell it today you would earn a total of 368.00 from holding Southern California Bancorp or generate 25.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Community vs. Southern California Bancorp
Performance |
| Timeline |
| First Community |
| Southern California |
First Community and Southern California Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Community and Southern California
The main advantage of trading using opposite First Community and Southern California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Community position performs unexpectedly, Southern California 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 Southern California will offset losses from the drop in Southern California's long position.| First Community vs. Community West Bancshares | First Community vs. First Financial Northwest | First Community vs. First Northwest Bancorp | First Community vs. Home Federal Bancorp |
| Southern California vs. Avidbank Holdings | Southern California vs. American Riviera Bank | Southern California vs. American Business Bk | Southern California vs. Private Bancorp of |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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