Correlation Between Sierra Bancorp and West Bancorporation
Can any of the company-specific risk be diversified away by investing in both Sierra Bancorp and West Bancorporation 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 West Bancorporation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sierra Bancorp and West Bancorporation, you can compare the effects of market volatilities on Sierra Bancorp and West Bancorporation 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 West Bancorporation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sierra Bancorp and West Bancorporation.
Diversification Opportunities for Sierra Bancorp and West Bancorporation
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sierra and West is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Sierra Bancorp and West Bancorp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Bancorporation 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 West Bancorporation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West Bancorporation has no effect on the direction of Sierra Bancorp i.e., Sierra Bancorp and West Bancorporation go up and down completely randomly.
Pair Corralation between Sierra Bancorp and West Bancorporation
Given the investment horizon of 90 days Sierra Bancorp is expected to generate 1.0 times more return on investment than West Bancorporation. However, Sierra Bancorp is 1.0 times less risky than West Bancorporation. It trades about 0.05 of its potential returns per unit of risk. West Bancorporation is currently generating about 0.02 per unit of risk. If you would invest 2,028 in Sierra Bancorp on September 3, 2024 and sell it today you would earn a total of 1,158 from holding Sierra Bancorp or generate 57.1% 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. West Bancorp.
Performance |
| Timeline |
| Sierra Bancorp |
| West Bancorporation |
Sierra Bancorp and West Bancorporation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sierra Bancorp and West Bancorporation
The main advantage of trading using opposite Sierra Bancorp and West Bancorporation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sierra Bancorp position performs unexpectedly, West Bancorporation 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 West Bancorporation will offset losses from the drop in West Bancorporation's long position.| Sierra Bancorp vs. JPMorgan Chase Co | Sierra Bancorp vs. Citigroup | Sierra Bancorp vs. Wells Fargo | Sierra Bancorp vs. Toronto Dominion Bank |
| West Bancorporation vs. JPMorgan Chase Co | West Bancorporation vs. Citigroup | West Bancorporation vs. Wells Fargo | West Bancorporation vs. Toronto Dominion Bank |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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