Correlation Between Sierra Bancorp and Washington Federal

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

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

Diversification Opportunities for Sierra Bancorp and Washington Federal

-0.5

Correlation Coefficient

Sierra Bancorp  Washington Federal

Very good diversification

The 3 months correlation between Sierra and Washington is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Sierra Bancorp and Washington Federal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Washington Federal 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 Washington Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Washington Federal has no effect on the direction of Sierra Bancorp i.e., Sierra Bancorp and Washington Federal go up and down completely randomly.

Pair Corralation between Sierra Bancorp and Washington Federal

Given the investment horizon of 90 days Sierra Bancorp is expected to generate 2.53 times more return on investment than Washington Federal. However, Sierra Bancorp is 2.53 times more volatile than Washington Federal. It trades about 0.04 of its potential returns per unit of risk. Washington Federal is currently generating about 0.06 per unit of risk. If you would invest  2,979  in Sierra Bancorp on September 3, 2024 and sell it today you would earn a total of  168.00  from holding Sierra Bancorp or generate 5.64% return on investment over 90 days.

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

Sierra Bancorp  vs.  Washington Federal

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.

Washington Federal

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Washington Federal are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Washington Federal is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Sierra Bancorp and Washington Federal

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

The idea behind Sierra Bancorp and Washington Federal 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.