Correlation Between Affinity Bancshares and Southern California

Can any of the company-specific risk be diversified away by investing in both Affinity Bancshares 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 Affinity Bancshares and Southern California into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Affinity Bancshares and Southern California

0.84

Correlation Coefficient

Affinity Bancshares  Southern California

Very poor diversification

The 3 months correlation between Affinity and Southern is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Affinity Bancshares and Southern California Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern California and Affinity Bancshares 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 Affinity Bancshares 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 Affinity Bancshares i.e., Affinity Bancshares and Southern California go up and down completely randomly.

Pair Corralation between Affinity Bancshares and Southern California

Given the investment horizon of 90 days Affinity Bancshares is expected to under-perform the Southern California. In addition to that, Affinity Bancshares is 1.72 times more volatile than Southern California Bancorp. It trades about -0.08 of its total potential returns per unit of risk. Southern California Bancorp is currently generating about -0.12 per unit of volatility. If you would invest  1,792  in Southern California Bancorp on November 29, 2024 and sell it today you would lose (199.00) from holding Southern California Bancorp or give up 11.1% of portfolio value over 90 days.

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

Affinity Bancshares  vs.  Southern California Bancorp

Affinity Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Affinity Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in March 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Southern California

Risk-Adjusted Performance

Very Weak

Over the last 90 days Southern California Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Affinity Bancshares and Southern California

The main advantage of trading using opposite Affinity Bancshares and Southern California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Affinity Bancshares 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.

The idea behind Affinity Bancshares and Southern California 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.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .