Correlation Between ST Bancorp and TriCo Bancshares

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

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

Diversification Opportunities for ST Bancorp and TriCo Bancshares

0.79

Correlation Coefficient

ST Bancorp  TriCo Bancshares

Poor diversification

The 3 months correlation between STBA and TriCo is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding ST Bancorp and TriCo Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TriCo Bancshares and ST 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 ST Bancorp 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 ST Bancorp i.e., ST Bancorp and TriCo Bancshares go up and down completely randomly.

Pair Corralation between ST Bancorp and TriCo Bancshares

Given the investment horizon of 90 days ST Bancorp is expected to under-perform the TriCo Bancshares. But the stock apears to be less risky and, when comparing its historical volatility, ST Bancorp is 1.09 times less risky than TriCo Bancshares. The stock trades about -0.07 of its potential returns per unit of risk. The TriCo Bancshares is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  4,095  in TriCo Bancshares on May 10, 2025 and sell it today you would lose (10.00) from holding TriCo Bancshares or give up 0.24% of portfolio value over 90 days.

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

ST Bancorp  vs.  TriCo Bancshares

ST Bancorp

Risk-Adjusted Performance

Weakest

Over the last 90 days ST Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, ST Bancorp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

TriCo Bancshares

Risk-Adjusted Performance

Weakest

Over the last 90 days TriCo Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, TriCo Bancshares is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with ST Bancorp and TriCo Bancshares

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