Correlation Between Sierra Bancorp and BankFinancial

Can any of the company-specific risk be diversified away by investing in both Sierra Bancorp and BankFinancial 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 Sierra Bancorp and BankFinancial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sierra Bancorp and BankFinancial, you can compare the effects of market volatilities on Sierra Bancorp and BankFinancial 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 Sierra Bancorp with a short position of BankFinancial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sierra Bancorp and BankFinancial.

Diversification Opportunities for Sierra Bancorp and BankFinancial

0.62

Correlation Coefficient

Sierra Bancorp  BankFinancial

Poor diversification

The 3 months correlation between Sierra and BankFinancial is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Sierra Bancorp and BankFinancial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BankFinancial and Sierra Bancorp 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 Sierra Bancorp are associated (or correlated) with BankFinancial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BankFinancial has no effect on the direction of Sierra Bancorp i.e., Sierra Bancorp and BankFinancial go up and down completely randomly.

Pair Corralation between Sierra Bancorp and BankFinancial

Given the investment horizon of 90 days Sierra Bancorp is expected to under-perform the BankFinancial. In addition to that, Sierra Bancorp is 1.15 times more volatile than BankFinancial. It trades about 0.0 of its total potential returns per unit of risk. BankFinancial is currently generating about 0.03 per unit of volatility. If you would invest  1,260  in BankFinancial on December 31, 2024 and sell it today you would earn a total of  22.00  from holding BankFinancial or generate 1.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Sierra Bancorp  vs.  BankFinancial

Sierra Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sierra Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Sierra Bancorp is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

BankFinancial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BankFinancial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, BankFinancial is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Sierra Bancorp and BankFinancial

The main advantage of trading using opposite Sierra Bancorp and BankFinancial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sierra Bancorp position performs unexpectedly, BankFinancial 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 BankFinancial will offset losses from the drop in BankFinancial's long position.

The idea behind Sierra Bancorp and BankFinancial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 CEOs Directory module to screen CEOs from public companies around the world.