Correlation Between Southern Missouri and Sierra Bancorp

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

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

Diversification Opportunities for Southern Missouri and Sierra Bancorp

0.07

Correlation Coefficient

Southern Missouri  Sierra Bancorp

Significant diversification

The 3 months correlation between Southern and Sierra is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Southern Missouri Bancorp and Sierra Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sierra Bancorp and Southern Missouri 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 Southern Missouri Bancorp 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 Southern Missouri i.e., Southern Missouri and Sierra Bancorp go up and down completely randomly.

Pair Corralation between Southern Missouri and Sierra Bancorp

Given the investment horizon of 90 days Southern Missouri Bancorp is expected to under-perform the Sierra Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, Southern Missouri Bancorp is 1.38 times less risky than Sierra Bancorp. The stock trades about -0.01 of its potential returns per unit of risk. The Sierra Bancorp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,789  in Sierra Bancorp on March 1, 2024 and sell it today you would earn a total of  362.00  from holding Sierra Bancorp or generate 20.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Southern Missouri Bancorp  vs.  Sierra Bancorp

Southern Missouri Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southern Missouri Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Southern Missouri is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Sierra Bancorp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sierra Bancorp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Sierra Bancorp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Southern Missouri and Sierra Bancorp

The main advantage of trading using opposite Southern Missouri and Sierra Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern Missouri 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 Southern Missouri Bancorp 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.