Correlation Between Santa Cruz and Pacific Valley

Can any of the company-specific risk be diversified away by investing in both Santa Cruz and Pacific 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 Santa Cruz and Pacific Valley 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 Pacific Valley Bank, you can compare the effects of market volatilities on Santa Cruz and Pacific 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 Santa Cruz with a short position of Pacific Valley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Santa Cruz and Pacific Valley.

Diversification Opportunities for Santa Cruz and Pacific Valley

-0.09

Correlation Coefficient

Santa Cruz  Pacific Valley

Good diversification

The 3 months correlation between Santa and Pacific is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Santa Cruz County and Pacific Valley Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Valley Bank 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 Pacific Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Valley Bank has no effect on the direction of Santa Cruz i.e., Santa Cruz and Pacific Valley go up and down completely randomly.

Pair Corralation between Santa Cruz and Pacific Valley

Given the investment horizon of 90 days Santa Cruz County is expected to under-perform the Pacific Valley. But the otc stock apears to be less risky and, when comparing its historical volatility, Santa Cruz County is 1.51 times less risky than Pacific Valley. The otc stock trades about -0.18 of its potential returns per unit of risk. The Pacific Valley Bank is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  950.00  in Pacific Valley Bank on December 28, 2024 and sell it today you would earn a total of  20.00  from holding Pacific Valley Bank or generate 2.11% return on investment over 90 days.

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

Santa Cruz County  vs.  Pacific Valley Bank

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 latest conflicting performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pacific Valley Bank

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pacific Valley Bank are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Pacific Valley is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Santa Cruz and Pacific Valley

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

The idea behind Santa Cruz County and Pacific Valley Bank 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.