Correlation Between Regions Financial and Southern California

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

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

Diversification Opportunities for Regions Financial and Southern California

0.93

Correlation Coefficient

Regions Financial  Southern California

Almost no diversification

The 3 months correlation between Regions and Southern is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Regions Financial and Southern California Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern California and Regions Financial 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 Regions Financial 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 Regions Financial i.e., Regions Financial and Southern California go up and down completely randomly.

Pair Corralation between Regions Financial and Southern California

Allowing for the 90-day total investment horizon Regions Financial is expected to generate 1.47 times less return on investment than Southern California. But when comparing it to its historical volatility, Regions Financial is 1.01 times less risky than Southern California. It trades about 0.18 of its potential returns per unit of risk. Southern California Bancorp is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  1,678  in Southern California Bancorp on September 9, 2024 and sell it today you would earn a total of  86.00  from holding Southern California Bancorp or generate 5.13% return on investment over 90 days.

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

Regions Financial  vs.  Southern California Bancorp

Regions Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Regions Financial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Regions Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Southern California

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Southern California Bancorp are ranked lower than 14 (%) 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 Regions Financial and Southern California

The main advantage of trading using opposite Regions Financial and Southern California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Regions Financial 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 Regions Financial 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.