Correlation Between Sierra Bancorp and Business First
Can any of the company-specific risk be diversified away by investing in both Sierra Bancorp and Business First 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 Business First into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sierra Bancorp and Business First Bancshares, you can compare the effects of market volatilities on Sierra Bancorp and Business First 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 Business First. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sierra Bancorp and Business First.
Diversification Opportunities for Sierra Bancorp and Business First
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sierra and Business is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Sierra Bancorp and Business First Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Business First Bancshares 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 Business First. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Business First Bancshares has no effect on the direction of Sierra Bancorp i.e., Sierra Bancorp and Business First go up and down completely randomly.
Pair Corralation between Sierra Bancorp and Business First
Given the investment horizon of 90 days Sierra Bancorp is expected to generate 1.18 times more return on investment than Business First. However, Sierra Bancorp is 1.18 times more volatile than Business First Bancshares. It trades about 0.08 of its potential returns per unit of risk. Business First Bancshares is currently generating about 0.04 per unit of risk. If you would invest 1,859 in Sierra Bancorp on December 5, 2024 and sell it today you would earn a total of 1,037 from holding Sierra Bancorp or generate 55.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sierra Bancorp vs. Business First Bancshares
Performance |
| Timeline |
| Sierra Bancorp |
| Business First Bancshares |
Sierra Bancorp and Business First Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sierra Bancorp and Business First
The main advantage of trading using opposite Sierra Bancorp and Business First positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sierra Bancorp position performs unexpectedly, Business First 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 Business First will offset losses from the drop in Business First'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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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