Correlation Between Pacific Financial and American Business
Can any of the company-specific risk be diversified away by investing in both Pacific Financial and American 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 Pacific Financial and American Business into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pacific Financial Corp and American Business Bk, you can compare the effects of market volatilities on Pacific Financial and American 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 Pacific Financial with a short position of American Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacific Financial and American Business.
Diversification Opportunities for Pacific Financial and American Business
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Pacific and American is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Financial Corp and American Business Bk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Business and Pacific Financial 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 Pacific Financial Corp are associated (or correlated) with American Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Business has no effect on the direction of Pacific Financial i.e., Pacific Financial and American Business go up and down completely randomly.
Pair Corralation between Pacific Financial and American Business
Given the investment horizon of 90 days Pacific Financial is expected to generate 1.1 times less return on investment than American Business. In addition to that, Pacific Financial is 1.29 times more volatile than American Business Bk. It trades about 0.36 of its total potential returns per unit of risk. American Business Bk is currently generating about 0.51 per unit of volatility. If you would invest 4,024 in American Business Bk on September 2, 2024 and sell it today you would earn a total of 451.00 from holding American Business Bk or generate 11.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pacific Financial Corp vs. American Business Bk
Performance |
| Timeline |
| Pacific Financial Corp |
| American Business |
Pacific Financial and American Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pacific Financial and American Business
The main advantage of trading using opposite Pacific Financial and American Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pacific Financial position performs unexpectedly, American 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 American Business will offset losses from the drop in American Business' long position.| Pacific Financial vs. Pioneer Bankcorp | Pacific Financial vs. Liberty Northwest Bancorp | Pacific Financial vs. First Community | Pacific Financial vs. Coeur dAlene Bancorp |
| American Business vs. Private Bancorp of | American Business vs. Avidbank Holdings | American Business vs. Century Next Financial | American Business vs. American Riviera 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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