Correlation Between Capitol Federal and Sierra Bancorp

Can any of the company-specific risk be diversified away by investing in both Capitol 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 Capitol 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 Capitol Federal Financial and Sierra Bancorp, you can compare the effects of market volatilities on Capitol 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 Capitol Federal with a short position of Sierra Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capitol Federal and Sierra Bancorp.

Diversification Opportunities for Capitol Federal and Sierra Bancorp

0.78

Correlation Coefficient

Capitol Federal  Sierra Bancorp

Poor diversification

The 3 months correlation between Capitol and Sierra is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Capitol Federal Financial and Sierra Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sierra Bancorp and Capitol 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 Capitol Federal Financial 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 Capitol Federal i.e., Capitol Federal and Sierra Bancorp go up and down completely randomly.

Pair Corralation between Capitol Federal and Sierra Bancorp

Given the investment horizon of 90 days Capitol Federal Financial is expected to generate 0.69 times more return on investment than Sierra Bancorp. However, Capitol Federal Financial is 1.45 times less risky than Sierra Bancorp. It trades about 0.11 of its potential returns per unit of risk. Sierra Bancorp is currently generating about 0.05 per unit of risk. If you would invest  583.00  in Capitol Federal Financial on September 3, 2024 and sell it today you would earn a total of  85.00  from holding Capitol Federal Financial or generate 14.58% return on investment over 90 days.

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

Capitol Federal Financial  vs.  Sierra Bancorp

Capitol Federal Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capitol Federal Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Capitol Federal displayed solid returns over the last few months and may actually be approaching a breakup point.

Sierra Bancorp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sierra Bancorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Sierra Bancorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Capitol Federal and Sierra Bancorp

The main advantage of trading using opposite Capitol Federal and Sierra Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capitol 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.

The idea behind Capitol Federal Financial and Sierra Bancorp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.