Correlation Between Heritage Financial and TriCo Bancshares
Can any of the company-specific risk be diversified away by investing in both Heritage Financial and TriCo Bancshares 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 Heritage Financial and TriCo Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Heritage Financial and TriCo Bancshares, you can compare the effects of market volatilities on Heritage Financial and TriCo Bancshares 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 Heritage Financial with a short position of TriCo Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heritage Financial and TriCo Bancshares.
Diversification Opportunities for Heritage Financial and TriCo Bancshares
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Heritage and TriCo is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Heritage Financial and TriCo Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TriCo Bancshares and Heritage 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 Heritage Financial are associated (or correlated) with TriCo Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TriCo Bancshares has no effect on the direction of Heritage Financial i.e., Heritage Financial and TriCo Bancshares go up and down completely randomly.
Pair Corralation between Heritage Financial and TriCo Bancshares
Given the investment horizon of 90 days Heritage Financial is expected to generate 1.16 times more return on investment than TriCo Bancshares. However, Heritage Financial is 1.16 times more volatile than TriCo Bancshares. It trades about 0.13 of its potential returns per unit of risk. TriCo Bancshares is currently generating about 0.04 per unit of risk. If you would invest 2,450 in Heritage Financial on November 1, 2024 and sell it today you would earn a total of 107.80 from holding Heritage Financial or generate 4.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.0% |
| Values | Daily Returns |
Heritage Financial vs. TriCo Bancshares
Performance |
| Timeline |
| Heritage Financial |
| TriCo Bancshares |
Heritage Financial and TriCo Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Heritage Financial and TriCo Bancshares
The main advantage of trading using opposite Heritage Financial and TriCo Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heritage Financial position performs unexpectedly, TriCo Bancshares 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 TriCo Bancshares will offset losses from the drop in TriCo Bancshares' long position.| Heritage Financial vs. Heritage Commerce Corp | Heritage Financial vs. Horizon Bancorp | Heritage Financial vs. Heartland Financial USA | Heritage Financial vs. Independent Bank |
| TriCo Bancshares vs. First Northwest Bancorp | TriCo Bancshares vs. Community West Bancshares | TriCo Bancshares vs. First Financial Northwest | TriCo Bancshares vs. Great Southern Bancorp |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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