Correlation Between Alerus Financial and Southern California

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

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

Diversification Opportunities for Alerus Financial and Southern California

0.56

Correlation Coefficient

Alerus Financial  Southern California

Very weak diversification

The 3 months correlation between Alerus and Southern is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Alerus Financial Corp and Southern California Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern California and Alerus 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 Alerus Financial Corp 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 Alerus Financial i.e., Alerus Financial and Southern California go up and down completely randomly.

Pair Corralation between Alerus Financial and Southern California

Given the investment horizon of 90 days Alerus Financial Corp is expected to generate 0.97 times more return on investment than Southern California. However, Alerus Financial Corp is 1.04 times less risky than Southern California. It trades about -0.04 of its potential returns per unit of risk. Southern California Bancorp is currently generating about -0.13 per unit of risk. If you would invest  1,937  in Alerus Financial Corp on December 22, 2024 and sell it today you would lose (77.00) from holding Alerus Financial Corp or give up 3.98% of portfolio value over 90 days.

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

Alerus Financial Corp  vs.  Southern California Bancorp

Alerus Financial Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alerus Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Alerus Financial is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

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 inconsistent performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Alerus Financial and Southern California

The main advantage of trading using opposite Alerus Financial and Southern California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alerus Financial 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 Alerus Financial Corp 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.