Correlation Between Santa Cruz and 1st Colonial

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

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

Diversification Opportunities for Santa Cruz and 1st Colonial

0.12

Correlation Coefficient

Santa Cruz  1st Colonial

Average diversification

The 3 months correlation between Santa and 1st is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Santa Cruz County and 1st Colonial Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1st Colonial Bancorp and Santa Cruz 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 Santa Cruz County are associated (or correlated) with 1st Colonial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1st Colonial Bancorp has no effect on the direction of Santa Cruz i.e., Santa Cruz and 1st Colonial go up and down completely randomly.

Pair Corralation between Santa Cruz and 1st Colonial

Given the investment horizon of 90 days Santa Cruz County is expected to under-perform the 1st Colonial. But the otc stock apears to be less risky and, when comparing its historical volatility, Santa Cruz County is 1.38 times less risky than 1st Colonial. The otc stock trades about -0.16 of its potential returns per unit of risk. The 1st Colonial Bancorp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,490  in 1st Colonial Bancorp on December 27, 2024 and sell it today you would earn a total of  10.00  from holding 1st Colonial Bancorp or generate 0.67% return on investment over 90 days.

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

Santa Cruz County  vs.  1st Colonial Bancorp

Santa Cruz County

Risk-Adjusted Performance

Very Weak

Over the last 90 days Santa Cruz County has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

1st Colonial Bancorp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in 1st Colonial Bancorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Santa Cruz and 1st Colonial

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

The idea behind Santa Cruz County and 1st Colonial 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.