Correlation Between Old Second and Pacific Premier
Can any of the company-specific risk be diversified away by investing in both Old Second and Pacific Premier 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 Old Second and Pacific Premier into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Old Second Bancorp and Pacific Premier Bancorp, you can compare the effects of market volatilities on Old Second and Pacific Premier 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 Old Second with a short position of Pacific Premier. Check out your portfolio center. Please also check ongoing floating volatility patterns of Old Second and Pacific Premier.
Diversification Opportunities for Old Second and Pacific Premier
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Old and Pacific is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Old Second Bancorp and Pacific Premier Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Premier Bancorp and Old Second 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 Old Second Bancorp are associated (or correlated) with Pacific Premier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Premier Bancorp has no effect on the direction of Old Second i.e., Old Second and Pacific Premier go up and down completely randomly.
Pair Corralation between Old Second and Pacific Premier
Given the investment horizon of 90 days Old Second is expected to generate 1.18 times less return on investment than Pacific Premier. But when comparing it to its historical volatility, Old Second Bancorp is 1.35 times less risky than Pacific Premier. It trades about 0.06 of its potential returns per unit of risk. Pacific Premier Bancorp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,971 in Pacific Premier Bancorp on September 2, 2024 and sell it today you would earn a total of 869.00 from holding Pacific Premier Bancorp or generate 44.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Old Second Bancorp vs. Pacific Premier Bancorp
Performance |
| Timeline |
| Old Second Bancorp |
| Pacific Premier Bancorp |
Old Second and Pacific Premier Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Old Second and Pacific Premier
The main advantage of trading using opposite Old Second and Pacific Premier positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Old Second position performs unexpectedly, Pacific Premier 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 Pacific Premier will offset losses from the drop in Pacific Premier's long position.| Old Second vs. Ohio Valley Banc | Old Second vs. Peoples Bancorp | Old Second vs. OceanFirst Financial Corp | Old Second vs. QCR Holdings |
| Pacific Premier vs. Community West Bancshares | Pacific Premier vs. Heritage Financial | Pacific Premier vs. First Financial Northwest | Pacific Premier vs. Sierra Bancorp |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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