Correlation Between Sierra Bancorp and Affinity Bancshares

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

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

Diversification Opportunities for Sierra Bancorp and Affinity Bancshares

0.21

Correlation Coefficient

Sierra Bancorp  Affinity Bancshares

Modest diversification

The 3 months correlation between Sierra and Affinity is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Sierra Bancorp and Affinity Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Affinity Bancshares 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 Affinity Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Affinity Bancshares has no effect on the direction of Sierra Bancorp i.e., Sierra Bancorp and Affinity Bancshares go up and down completely randomly.

Pair Corralation between Sierra Bancorp and Affinity Bancshares

Given the investment horizon of 90 days Sierra Bancorp is expected to generate 5.48 times more return on investment than Affinity Bancshares. However, Sierra Bancorp is 5.48 times more volatile than Affinity Bancshares. It trades about 0.05 of its potential returns per unit of risk. Affinity Bancshares is currently generating about 0.02 per unit of risk. If you would invest  2,980  in Sierra Bancorp on September 4, 2024 and sell it today you would earn a total of  206.00  from holding Sierra Bancorp or generate 6.91% return on investment over 90 days.

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

Sierra Bancorp  vs.  Affinity Bancshares

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 fragile basic indicators, Sierra Bancorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Affinity Bancshares

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Affinity Bancshares are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental drivers, Affinity Bancshares is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Sierra Bancorp and Affinity Bancshares

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

The idea behind Sierra Bancorp and Affinity Bancshares 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.