Correlation Between First Financial and Sierra Bancorp
Can any of the company-specific risk be diversified away by investing in both First Financial 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 Financial 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 Financial Bankshares and Sierra Bancorp, you can compare the effects of market volatilities on First Financial 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 Financial with a short position of Sierra Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Financial and Sierra Bancorp.
Diversification Opportunities for First Financial and Sierra Bancorp
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Sierra is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding First Financial Bankshares and Sierra Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sierra Bancorp and First Financial 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 Financial Bankshares 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 Financial i.e., First Financial and Sierra Bancorp go up and down completely randomly.
Pair Corralation between First Financial and Sierra Bancorp
Given the investment horizon of 90 days First Financial is expected to generate 1.69 times less return on investment than Sierra Bancorp. But when comparing it to its historical volatility, First Financial Bankshares is 1.18 times less risky than Sierra Bancorp. It trades about 0.06 of its potential returns per unit of risk. Sierra Bancorp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,618 in Sierra Bancorp on August 31, 2024 and sell it today you would earn a total of 1,529 from holding Sierra Bancorp or generate 94.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Financial Bankshares vs. Sierra Bancorp
Performance |
| Timeline |
| First Financial Bank |
| Sierra Bancorp |
First Financial and Sierra Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Financial and Sierra Bancorp
The main advantage of trading using opposite First Financial and Sierra Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Financial 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 Financial vs. BOK Financial | First Financial vs. Auburn National Bancorporation | First Financial vs. Great Southern Bancorp | First Financial vs. First Guaranty 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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