Correlation Between PacWest Bancorp and US Bancorp

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Can any of the company-specific risk be diversified away by investing in both PacWest Bancorp and US 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 PacWest Bancorp and US Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PacWest Bancorp and US Bancorp, you can compare the effects of market volatilities on PacWest Bancorp and US 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 PacWest Bancorp with a short position of US Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of PacWest Bancorp and US Bancorp.

Diversification Opportunities for PacWest Bancorp and US Bancorp

0.26
  Correlation Coefficient

Modest diversification

The 3 months correlation between PacWest and USB is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding PacWest Bancorp and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp 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 US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of PacWest Bancorp i.e., PacWest Bancorp and US Bancorp go up and down completely randomly.

Pair Corralation between PacWest Bancorp and US Bancorp

If you would invest  3,885  in US Bancorp on August 24, 2024 and sell it today you would earn a total of  1,254  from holding US Bancorp or generate 32.28% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy0.8%
ValuesDaily Returns

PacWest Bancorp  vs.  US Bancorp

 Performance 
       Timeline  
PacWest Bancorp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days PacWest Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, PacWest Bancorp is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
US Bancorp 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in US Bancorp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, US Bancorp sustained solid returns over the last few months and may actually be approaching a breakup point.

PacWest Bancorp and US Bancorp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PacWest Bancorp and US Bancorp

The main advantage of trading using opposite PacWest Bancorp and US Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PacWest Bancorp position performs unexpectedly, US 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 US Bancorp will offset losses from the drop in US Bancorp's long position.
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The idea behind PacWest Bancorp and US Bancorp 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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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.

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