Correlation Between Prosperity Bancshares and Sierra Bancorp
Can any of the company-specific risk be diversified away by investing in both Prosperity Bancshares 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 Prosperity Bancshares and Sierra Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prosperity Bancshares and Sierra Bancorp, you can compare the effects of market volatilities on Prosperity Bancshares 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 Prosperity Bancshares with a short position of Sierra Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prosperity Bancshares and Sierra Bancorp.
Diversification Opportunities for Prosperity Bancshares and Sierra Bancorp
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Prosperity and Sierra is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Prosperity Bancshares and Sierra Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sierra Bancorp and Prosperity Bancshares 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 Prosperity Bancshares 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 Prosperity Bancshares i.e., Prosperity Bancshares and Sierra Bancorp go up and down completely randomly.
Pair Corralation between Prosperity Bancshares and Sierra Bancorp
Allowing for the 90-day total investment horizon Prosperity Bancshares is expected to generate 0.5 times more return on investment than Sierra Bancorp. However, Prosperity Bancshares is 1.99 times less risky than Sierra Bancorp. It trades about 0.29 of its potential returns per unit of risk. Sierra Bancorp is currently generating about 0.13 per unit of risk. If you would invest 7,410 in Prosperity Bancshares on August 28, 2024 and sell it today you would earn a total of 1,097 from holding Prosperity Bancshares or generate 14.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prosperity Bancshares vs. Sierra Bancorp
Performance |
| Timeline |
| Prosperity Bancshares |
| Sierra Bancorp |
Prosperity Bancshares and Sierra Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prosperity Bancshares and Sierra Bancorp
The main advantage of trading using opposite Prosperity Bancshares and Sierra Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prosperity Bancshares 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.| Prosperity Bancshares vs. Fifth Third Bancorp | Prosperity Bancshares vs. Zions Bancorporation | Prosperity Bancshares vs. Huntington Bancshares Incorporated | Prosperity Bancshares vs. Comerica |
| 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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