Correlation Between Pacific Financial and Mission Valley

Can any of the company-specific risk be diversified away by investing in both Pacific Financial and Mission Valley 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 Mission Valley 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 Mission Valley Bancorp, you can compare the effects of market volatilities on Pacific Financial and Mission Valley 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 Mission Valley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacific Financial and Mission Valley.

Diversification Opportunities for Pacific Financial and Mission Valley

0.67

Correlation Coefficient

Pacific Financial  Mission Valley

Poor diversification

The 3 months correlation between Pacific and Mission is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Financial Corp and Mission Valley Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mission Valley Bancorp 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 Mission Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mission Valley Bancorp has no effect on the direction of Pacific Financial i.e., Pacific Financial and Mission Valley go up and down completely randomly.

Pair Corralation between Pacific Financial and Mission Valley

Given the investment horizon of 90 days Pacific Financial Corp is expected to under-perform the Mission Valley. But the otc stock apears to be less risky and, when comparing its historical volatility, Pacific Financial Corp is 1.66 times less risky than Mission Valley. The otc stock trades about -0.21 of its potential returns per unit of risk. The Mission Valley Bancorp is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  1,700  in Mission Valley Bancorp on December 29, 2024 and sell it today you would lose (166.00) from holding Mission Valley Bancorp or give up 9.76% of portfolio value over 90 days.

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

Pacific Financial Corp  vs.  Mission Valley Bancorp

Pacific Financial Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pacific Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Mission Valley Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mission Valley Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Pacific Financial and Mission Valley

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

The idea behind Pacific Financial Corp and Mission Valley 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.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.