Correlation Between Permanent TSB and Sierra Bancorp

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

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

Diversification Opportunities for Permanent TSB and Sierra Bancorp

-0.73

Correlation Coefficient

Permanent TSB  Sierra Bancorp

Pay attention - limited upside

The 3 months correlation between Permanent and Sierra is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Permanent TSB Group and Sierra Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sierra Bancorp and Permanent TSB 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 Permanent TSB Group 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 Permanent TSB i.e., Permanent TSB and Sierra Bancorp go up and down completely randomly.

Pair Corralation between Permanent TSB and Sierra Bancorp

Assuming the 90 days horizon Permanent TSB Group is expected to under-perform the Sierra Bancorp. But the pink sheet apears to be less risky and, when comparing its historical volatility, Permanent TSB Group is 1.38 times less risky than Sierra Bancorp. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Sierra Bancorp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,939  in Sierra Bancorp on September 14, 2024 and sell it today you would earn a total of  162.00  from holding Sierra Bancorp or generate 5.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Permanent TSB Group  vs.  Sierra Bancorp

Permanent TSB Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Permanent TSB Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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.

Pair Trading with Permanent TSB and Sierra Bancorp

The main advantage of trading using opposite Permanent TSB and Sierra Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Permanent TSB 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 Permanent TSB Group 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.