Correlation Between MT Bank and PacWest Bancorp
Can any of the company-specific risk be diversified away by investing in both MT Bank 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 MT Bank and PacWest Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MT Bank and PacWest Bancorp, you can compare the effects of market volatilities on MT Bank 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 MT Bank with a short position of PacWest Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of MT Bank and PacWest Bancorp.
Diversification Opportunities for MT Bank and PacWest Bancorp
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between MTB and PacWest is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding MT Bank and PacWest Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PacWest Bancorp and MT Bank 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 MT Bank 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 MT Bank i.e., MT Bank and PacWest Bancorp go up and down completely randomly.
Pair Corralation between MT Bank and PacWest Bancorp
Considering the 90-day investment horizon MT Bank is expected to generate 0.18 times more return on investment than PacWest Bancorp. However, MT Bank is 5.56 times less risky than PacWest Bancorp. It trades about 0.05 of its potential returns per unit of risk. PacWest Bancorp is currently generating about 0.01 per unit of risk. If you would invest 15,103 in MT Bank on August 24, 2024 and sell it today you would earn a total of 6,559 from holding MT Bank or generate 43.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 32.12% |
| Values | Daily Returns |
MT Bank vs. PacWest Bancorp
Performance |
| Timeline |
| MT Bank |
| PacWest Bancorp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
MT Bank and PacWest Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MT Bank and PacWest Bancorp
The main advantage of trading using opposite MT Bank and PacWest Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MT Bank 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.| MT Bank vs. US Bancorp | MT Bank vs. Truist Financial Corp | MT Bank vs. Fifth Third Bancorp | MT Bank vs. KeyCorp |
| PacWest Bancorp vs. Zions Bancorporation | PacWest Bancorp vs. KeyCorp | PacWest Bancorp vs. Comerica | PacWest Bancorp vs. First Horizon National |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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