Correlation Between First Capital and Sierra Bancorp
Can any of the company-specific risk be diversified away by investing in both First Capital and Sierra Bancorp 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 First Capital and Sierra Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Capital and Sierra Bancorp, you can compare the effects of market volatilities on First Capital and Sierra Bancorp 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 First Capital with a short position of Sierra Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Capital and Sierra Bancorp.
Diversification Opportunities for First Capital and Sierra Bancorp
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between First and Sierra is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding First Capital and Sierra Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sierra Bancorp and First Capital 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 First Capital are associated (or correlated) with Sierra Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sierra Bancorp has no effect on the direction of First Capital i.e., First Capital and Sierra Bancorp go up and down completely randomly.
Pair Corralation between First Capital and Sierra Bancorp
Given the investment horizon of 90 days First Capital is expected to under-perform the Sierra Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, First Capital is 2.22 times less risky than Sierra Bancorp. The stock trades about -0.02 of its potential returns per unit of risk. The Sierra Bancorp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 2,869 in Sierra Bancorp on August 24, 2024 and sell it today you would earn a total of 370.00 from holding Sierra Bancorp or generate 12.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Capital vs. Sierra Bancorp
Performance |
| Timeline |
| First Capital |
| Sierra Bancorp |
First Capital and Sierra Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Capital and Sierra Bancorp
The main advantage of trading using opposite First Capital and Sierra Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Capital position performs unexpectedly, Sierra Bancorp 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 Sierra Bancorp will offset losses from the drop in Sierra Bancorp's long position.| First Capital vs. Home Federal Bancorp | First Capital vs. First Financial Northwest | First Capital vs. First Northwest Bancorp | First Capital vs. Community West Bancshares |
| Sierra Bancorp vs. Home Federal Bancorp | Sierra Bancorp vs. First Financial Northwest | Sierra Bancorp vs. First Northwest Bancorp | Sierra Bancorp 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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