Correlation Between Sierra Bancorp and FVCBankcorp
Can any of the company-specific risk be diversified away by investing in both Sierra Bancorp and FVCBankcorp 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 FVCBankcorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sierra Bancorp and FVCBankcorp, you can compare the effects of market volatilities on Sierra Bancorp and FVCBankcorp 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 FVCBankcorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sierra Bancorp and FVCBankcorp.
Diversification Opportunities for Sierra Bancorp and FVCBankcorp
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sierra and FVCBankcorp is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Sierra Bancorp and FVCBankcorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FVCBankcorp 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 FVCBankcorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FVCBankcorp has no effect on the direction of Sierra Bancorp i.e., Sierra Bancorp and FVCBankcorp go up and down completely randomly.
Pair Corralation between Sierra Bancorp and FVCBankcorp
Given the investment horizon of 90 days Sierra Bancorp is expected to generate 0.43 times more return on investment than FVCBankcorp. However, Sierra Bancorp is 2.31 times less risky than FVCBankcorp. It trades about 0.02 of its potential returns per unit of risk. FVCBankcorp is currently generating about -0.09 per unit of risk. If you would invest 2,921 in Sierra Bancorp on October 21, 2024 and sell it today you would earn a total of 16.00 from holding Sierra Bancorp or generate 0.55% 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. FVCBankcorp
Performance |
| Timeline |
| Sierra Bancorp |
| FVCBankcorp |
Sierra Bancorp and FVCBankcorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sierra Bancorp and FVCBankcorp
The main advantage of trading using opposite Sierra Bancorp and FVCBankcorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sierra Bancorp position performs unexpectedly, FVCBankcorp 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 FVCBankcorp will offset losses from the drop in FVCBankcorp's long position.| Sierra Bancorp vs. Home Federal Bancorp | Sierra Bancorp vs. First Financial Northwest | Sierra Bancorp vs. First Northwest Bancorp | Sierra Bancorp vs. First Capital |
| FVCBankcorp vs. Home Federal Bancorp | FVCBankcorp vs. First Financial Northwest | FVCBankcorp vs. First Northwest Bancorp | FVCBankcorp vs. First Capital |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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