Correlation Between PacWest Bancorp and Signature Bank
Can any of the company-specific risk be diversified away by investing in both PacWest Bancorp and Signature Bank 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 PacWest Bancorp and Signature Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PacWest Bancorp and Signature Bank, you can compare the effects of market volatilities on PacWest Bancorp and Signature Bank 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 PacWest Bancorp with a short position of Signature Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of PacWest Bancorp and Signature Bank.
Diversification Opportunities for PacWest Bancorp and Signature Bank
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between PacWest and Signature is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding PacWest Bancorp and Signature Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Signature Bank and PacWest 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 PacWest Bancorp are associated (or correlated) with Signature Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Signature Bank has no effect on the direction of PacWest Bancorp i.e., PacWest Bancorp and Signature Bank go up and down completely randomly.
Pair Corralation between PacWest Bancorp and Signature Bank
Given the investment horizon of 90 days PacWest Bancorp is expected to generate 0.27 times more return on investment than Signature Bank. However, PacWest Bancorp is 3.77 times less risky than Signature Bank. It trades about 0.18 of its potential returns per unit of risk. Signature Bank is currently generating about 0.03 per unit of risk. If you would invest 859.00 in PacWest Bancorp on September 4, 2024 and sell it today you would earn a total of 195.00 from holding PacWest Bancorp or generate 22.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PacWest Bancorp vs. Signature Bank
Performance |
| Timeline |
| PacWest Bancorp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Signature Bank |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
PacWest Bancorp and Signature Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PacWest Bancorp and Signature Bank
The main advantage of trading using opposite PacWest Bancorp and Signature Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PacWest Bancorp position performs unexpectedly, Signature Bank 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 Signature Bank will offset losses from the drop in Signature Bank's long position.| PacWest Bancorp vs. Zions Bancorporation | PacWest Bancorp vs. KeyCorp | PacWest Bancorp vs. Comerica | PacWest Bancorp vs. First Horizon National |
| Signature Bank vs. Zions Bancorporation | Signature Bank vs. KeyCorp | Signature Bank vs. Comerica | Signature Bank 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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