Correlation Between First Bancorp and PacWest Bancorp
Can any of the company-specific risk be diversified away by investing in both First Bancorp and PacWest 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 First Bancorp and PacWest Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Bancorp and PacWest Bancorp, you can compare the effects of market volatilities on First Bancorp and PacWest 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 First Bancorp with a short position of PacWest Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Bancorp and PacWest Bancorp.
Diversification Opportunities for First Bancorp and PacWest Bancorp
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between First and PacWest is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding First Bancorp and PacWest Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PacWest Bancorp and First 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 First Bancorp are associated (or correlated) with PacWest Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PacWest Bancorp has no effect on the direction of First Bancorp i.e., First Bancorp and PacWest Bancorp go up and down completely randomly.
Pair Corralation between First Bancorp and PacWest Bancorp
If you would invest 4,217 in First Bancorp on August 30, 2024 and sell it today you would earn a total of 569.00 from holding First Bancorp or generate 13.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 4.35% |
| Values | Daily Returns |
First Bancorp vs. PacWest Bancorp
Performance |
| Timeline |
| First Bancorp |
| PacWest Bancorp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
First Bancorp and PacWest Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Bancorp and PacWest Bancorp
The main advantage of trading using opposite First Bancorp and PacWest Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Bancorp position performs unexpectedly, PacWest 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 PacWest Bancorp will offset losses from the drop in PacWest Bancorp's long position.| First Bancorp vs. Home Bancorp | First Bancorp vs. First Business Financial | First Bancorp vs. LINKBANCORP | First Bancorp vs. Great Southern Bancorp |
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Check out your portfolio center.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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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