Correlation Between Southern BancShares and First Community

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

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

Diversification Opportunities for Southern BancShares and First Community

-0.77

Correlation Coefficient

Southern BancShares  First Community

Pay attention - limited upside

The 3 months correlation between Southern and First is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Southern BancShares NC and First Community Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Community Financial and Southern 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 Southern BancShares NC are associated (or correlated) with First Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Community Financial has no effect on the direction of Southern BancShares i.e., Southern BancShares and First Community go up and down completely randomly.

Pair Corralation between Southern BancShares and First Community

Given the investment horizon of 90 days Southern BancShares NC is expected to generate 0.81 times more return on investment than First Community. However, Southern BancShares NC is 1.23 times less risky than First Community. It trades about 0.67 of its potential returns per unit of risk. First Community Financial is currently generating about 0.09 per unit of risk. If you would invest  689,517  in Southern BancShares NC on September 21, 2024 and sell it today you would earn a total of  125,483  from holding Southern BancShares NC or generate 18.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Southern BancShares NC  vs.  First Community Financial

Southern BancShares

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Southern BancShares NC are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Southern BancShares exhibited solid returns over the last few months and may actually be approaching a breakup point.

First Community Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Community Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Southern BancShares and First Community

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

The idea behind Southern BancShares NC and First Community Financial 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.