Correlation Between CP ALL and Southern BancShares

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

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

Diversification Opportunities for CP ALL and Southern BancShares

0.2

Correlation Coefficient

CP ALL  Southern BancShares

Modest diversification

The 3 months correlation between CVPBF and Southern is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding CP ALL Public and Southern BancShares PFD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern BancShares PFD and CP ALL 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 CP ALL Public are associated (or correlated) with Southern BancShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern BancShares PFD has no effect on the direction of CP ALL i.e., CP ALL and Southern BancShares go up and down completely randomly.

Pair Corralation between CP ALL and Southern BancShares

Assuming the 90 days horizon CP ALL Public is expected to under-perform the Southern BancShares. In addition to that, CP ALL is 2.7 times more volatile than Southern BancShares PFD. It trades about -0.13 of its total potential returns per unit of risk. Southern BancShares PFD is currently generating about -0.09 per unit of volatility. If you would invest  1,310  in Southern BancShares PFD on September 14, 2024 and sell it today you would lose (38.00) from holding Southern BancShares PFD or give up 2.9% of portfolio value over 90 days.

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

CP ALL Public  vs.  Southern BancShares PFD

CP ALL Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CP ALL Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Southern BancShares PFD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southern BancShares PFD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Southern BancShares is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CP ALL and Southern BancShares

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

The idea behind CP ALL Public and Southern BancShares PFD 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.