Correlation Between Sierra Bancorp and BankFinancial
Can any of the company-specific risk be diversified away by investing in both Sierra Bancorp and BankFinancial 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 Sierra Bancorp and BankFinancial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sierra Bancorp and BankFinancial, you can compare the effects of market volatilities on Sierra Bancorp and BankFinancial 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 Sierra Bancorp with a short position of BankFinancial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sierra Bancorp and BankFinancial.
Diversification Opportunities for Sierra Bancorp and BankFinancial
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sierra and BankFinancial is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Sierra Bancorp and BankFinancial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BankFinancial and Sierra Bancorp 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 Sierra Bancorp are associated (or correlated) with BankFinancial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BankFinancial has no effect on the direction of Sierra Bancorp i.e., Sierra Bancorp and BankFinancial go up and down completely randomly.
Pair Corralation between Sierra Bancorp and BankFinancial
Given the investment horizon of 90 days Sierra Bancorp is expected to generate 2.23 times less return on investment than BankFinancial. In addition to that, Sierra Bancorp is 1.42 times more volatile than BankFinancial. It trades about 0.02 of its total potential returns per unit of risk. BankFinancial is currently generating about 0.06 per unit of volatility. If you would invest 1,130 in BankFinancial on December 5, 2024 and sell it today you would earn a total of 133.00 from holding BankFinancial or generate 11.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sierra Bancorp vs. BankFinancial
Performance |
| Timeline |
| Sierra Bancorp |
| BankFinancial |
Sierra Bancorp and BankFinancial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sierra Bancorp and BankFinancial
The main advantage of trading using opposite Sierra Bancorp and BankFinancial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sierra Bancorp position performs unexpectedly, BankFinancial 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 BankFinancial will offset losses from the drop in BankFinancial's long position.| Sierra Bancorp vs. Home Federal Bancorp | ||
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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