Correlation Between Banco Macro and Southern California

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

By analyzing existing cross correlation between Banco Macro SA and Southern California Bancorp, you can compare the effects of market volatilities on Banco Macro and Southern California 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 Banco Macro with a short position of Southern California. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Macro and Southern California.

Diversification Opportunities for Banco Macro and Southern California

0.81

Correlation Coefficient

Banco Macro  Southern California

Very poor diversification

The 3 months correlation between Banco and Southern is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Banco Macro SA and Southern California Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern California and Banco Macro 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 Banco Macro SA are associated (or correlated) with Southern California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern California has no effect on the direction of Banco Macro i.e., Banco Macro and Southern California go up and down completely randomly.

Pair Corralation between Banco Macro and Southern California

Considering the 90-day investment horizon Banco Macro SA is expected to generate 1.83 times more return on investment than Southern California. However, Banco Macro is 1.83 times more volatile than Southern California Bancorp. It trades about 0.16 of its potential returns per unit of risk. Southern California Bancorp is currently generating about 0.2 per unit of risk. If you would invest  6,776  in Banco Macro SA on September 13, 2024 and sell it today you would earn a total of  2,209  from holding Banco Macro SA or generate 32.6% return on investment over 90 days.

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

Banco Macro SA  vs.  Southern California Bancorp

Banco Macro SA

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Macro SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Banco Macro sustained solid returns over the last few months and may actually be approaching a breakup point.

Southern California

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Southern California Bancorp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Southern California disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco Macro and Southern California

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

The idea behind Banco Macro SA and Southern California 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.

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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.