Correlation Between First Northwest and Sierra Bancorp
Can any of the company-specific risk be diversified away by investing in both First Northwest 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 Northwest 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 Northwest Bancorp and Sierra Bancorp, you can compare the effects of market volatilities on First Northwest 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 Northwest with a short position of Sierra Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Northwest and Sierra Bancorp.
Diversification Opportunities for First Northwest and Sierra Bancorp
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between First and Sierra is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding First Northwest Bancorp and Sierra Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sierra Bancorp and First Northwest 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 Northwest Bancorp 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 Northwest i.e., First Northwest and Sierra Bancorp go up and down completely randomly.
Pair Corralation between First Northwest and Sierra Bancorp
Given the investment horizon of 90 days First Northwest Bancorp is expected to under-perform the Sierra Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, First Northwest Bancorp is 1.17 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 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,931 in Sierra Bancorp on November 2, 2024 and sell it today you would earn a total of 1,104 from holding Sierra Bancorp or generate 57.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Northwest Bancorp vs. Sierra Bancorp
Performance |
| Timeline |
| First Northwest Bancorp |
| Sierra Bancorp |
First Northwest and Sierra Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Northwest and Sierra Bancorp
The main advantage of trading using opposite First Northwest and Sierra Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Northwest 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 Northwest vs. Home Federal Bancorp | First Northwest vs. First Financial Northwest | First Northwest vs. First Capital | First Northwest 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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