Correlation Between Home Federal and Sierra Bancorp
Can any of the company-specific risk be diversified away by investing in both Home Federal 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 Home Federal and Sierra Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Federal Bancorp and Sierra Bancorp, you can compare the effects of market volatilities on Home Federal 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 Home Federal with a short position of Sierra Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Federal and Sierra Bancorp.
Diversification Opportunities for Home Federal and Sierra Bancorp
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Home and Sierra is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Home Federal Bancorp and Sierra Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sierra Bancorp and Home Federal 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 Home Federal 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 Home Federal i.e., Home Federal and Sierra Bancorp go up and down completely randomly.
Pair Corralation between Home Federal and Sierra Bancorp
Given the investment horizon of 90 days Home Federal Bancorp is expected to under-perform the Sierra Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, Home Federal Bancorp is 1.9 times less risky than Sierra Bancorp. The stock trades about -0.03 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 2,915 in Sierra Bancorp on August 28, 2024 and sell it today you would earn a total of 323.00 from holding Sierra Bancorp or generate 11.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Home Federal Bancorp vs. Sierra Bancorp
Performance |
| Timeline |
| Home Federal Bancorp |
| Sierra Bancorp |
Home Federal and Sierra Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Federal and Sierra Bancorp
The main advantage of trading using opposite Home Federal and Sierra Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Federal 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.| Home Federal vs. Fifth Third Bancorp | Home Federal vs. Huntington Bancshares Incorporated | Home Federal vs. Comerica | Home Federal vs. MT Bank |
| Sierra Bancorp vs. Fifth Third Bancorp | Sierra Bancorp vs. Huntington Bancshares Incorporated | Sierra Bancorp vs. Comerica | Sierra Bancorp vs. MT 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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