Correlation Between 1st Colonial and Santa Cruz

Can any of the company-specific risk be diversified away by investing in both 1st Colonial and Santa Cruz 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 1st Colonial and Santa Cruz into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 1st Colonial Bancorp and Santa Cruz County, you can compare the effects of market volatilities on 1st Colonial and Santa Cruz 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 1st Colonial with a short position of Santa Cruz. Check out your portfolio center. Please also check ongoing floating volatility patterns of 1st Colonial and Santa Cruz.

Diversification Opportunities for 1st Colonial and Santa Cruz

-0.54

Correlation Coefficient

1st Colonial  Santa Cruz

Excellent diversification

The 3 months correlation between 1st and Santa is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding 1st Colonial Bancorp and Santa Cruz County in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santa Cruz County and 1st Colonial 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 1st Colonial Bancorp are associated (or correlated) with Santa Cruz. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santa Cruz County has no effect on the direction of 1st Colonial i.e., 1st Colonial and Santa Cruz go up and down completely randomly.

Pair Corralation between 1st Colonial and Santa Cruz

Given the investment horizon of 90 days 1st Colonial is expected to generate 3.51 times less return on investment than Santa Cruz. But when comparing it to its historical volatility, 1st Colonial Bancorp is 1.03 times less risky than Santa Cruz. It trades about 0.02 of its potential returns per unit of risk. Santa Cruz County is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,398  in Santa Cruz County on September 3, 2024 and sell it today you would earn a total of  1,752  from holding Santa Cruz County or generate 73.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.74%
Values	Daily Returns

1st Colonial Bancorp  vs.  Santa Cruz County

1st Colonial Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 1st Colonial Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 1st Colonial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Santa Cruz County

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Santa Cruz County are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Santa Cruz is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with 1st Colonial and Santa Cruz

The main advantage of trading using opposite 1st Colonial and Santa Cruz positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 1st Colonial position performs unexpectedly, Santa Cruz 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 Santa Cruz will offset losses from the drop in Santa Cruz's long position.

The idea behind 1st Colonial Bancorp and Santa Cruz County 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.