Correlation Between QCR Holdings and Sierra Bancorp

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

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

Diversification Opportunities for QCR Holdings and Sierra Bancorp

0.81

Correlation Coefficient

QCR Holdings  Sierra Bancorp

Very poor diversification

The 3 months correlation between QCR and Sierra is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding QCR Holdings and Sierra Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sierra Bancorp and QCR Holdings 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 QCR Holdings 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 QCR Holdings i.e., QCR Holdings and Sierra Bancorp go up and down completely randomly.

Pair Corralation between QCR Holdings and Sierra Bancorp

Given the investment horizon of 90 days QCR Holdings is expected to generate 0.66 times more return on investment than Sierra Bancorp. However, QCR Holdings is 1.52 times less risky than Sierra Bancorp. It trades about 0.25 of its potential returns per unit of risk. Sierra Bancorp is currently generating about 0.12 per unit of risk. If you would invest  7,910  in QCR Holdings on September 1, 2024 and sell it today you would earn a total of  1,301  from holding QCR Holdings or generate 16.45% return on investment over 90 days.

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

QCR Holdings  vs.  Sierra Bancorp

QCR Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in QCR Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, QCR Holdings demonstrated 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 fragile basic indicators, Sierra Bancorp may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with QCR Holdings and Sierra Bancorp

The main advantage of trading using opposite QCR Holdings and Sierra Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if QCR Holdings 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 QCR Holdings 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.