Correlation Between Bank of Marin and TriCo Bancshares

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

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

Diversification Opportunities for Bank of Marin and TriCo Bancshares

0.79

Correlation Coefficient

Bank of Marin  TriCo Bancshares

Poor diversification

The 3 months correlation between Bank and TriCo is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Marin and TriCo Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TriCo Bancshares and Bank of Marin 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 Bank of Marin are associated (or correlated) with TriCo Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TriCo Bancshares has no effect on the direction of Bank of Marin i.e., Bank of Marin and TriCo Bancshares go up and down completely randomly.

Pair Corralation between Bank of Marin and TriCo Bancshares

Given the investment horizon of 90 days Bank of Marin is expected to generate 1.37 times more return on investment than TriCo Bancshares. However, Bank of Marin is 1.37 times more volatile than TriCo Bancshares. It trades about -0.05 of its potential returns per unit of risk. TriCo Bancshares is currently generating about -0.11 per unit of risk. If you would invest  2,209  in Bank of Marin on January 9, 2025 and sell it today you would lose (162.00) from holding Bank of Marin or give up 7.33% of portfolio value over 90 days.

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

Bank of Marin  vs.  TriCo Bancshares

Bank of Marin

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank of Marin has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

TriCo Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days TriCo Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental drivers remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Bank of Marin and TriCo Bancshares

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

The idea behind Bank of Marin and TriCo 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.