Correlation Between PacWest Bancorp and Western Alliance
Can any of the company-specific risk be diversified away by investing in both PacWest Bancorp and Western Alliance 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 Western Alliance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PacWest Bancorp and Western Alliance Bancorporation, you can compare the effects of market volatilities on PacWest Bancorp and Western Alliance 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 Western Alliance. Check out your portfolio center. Please also check ongoing floating volatility patterns of PacWest Bancorp and Western Alliance.
Diversification Opportunities for PacWest Bancorp and Western Alliance
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between PacWest and Western is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding PacWest Bancorp and Western Alliance Bancorp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Alliance Ban 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 Western Alliance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Alliance Ban has no effect on the direction of PacWest Bancorp i.e., PacWest Bancorp and Western Alliance go up and down completely randomly.
Pair Corralation between PacWest Bancorp and Western Alliance
Given the investment horizon of 90 days PacWest Bancorp is expected to generate 2.64 times less return on investment than Western Alliance. In addition to that, PacWest Bancorp is 2.17 times more volatile than Western Alliance Bancorporation. It trades about 0.01 of its total potential returns per unit of risk. Western Alliance Bancorporation is currently generating about 0.05 per unit of volatility. If you would invest 5,776 in Western Alliance Bancorporation on August 27, 2024 and sell it today you would earn a total of 3,589 from holding Western Alliance Bancorporation or generate 62.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 31.85% |
| Values | Daily Returns |
PacWest Bancorp vs. Western Alliance Bancorp.
Performance |
| Timeline |
| PacWest Bancorp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Western Alliance Ban |
PacWest Bancorp and Western Alliance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PacWest Bancorp and Western Alliance
The main advantage of trading using opposite PacWest Bancorp and Western Alliance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PacWest Bancorp position performs unexpectedly, Western Alliance 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 Western Alliance will offset losses from the drop in Western Alliance's long position.| PacWest Bancorp vs. Zions Bancorporation | PacWest Bancorp vs. KeyCorp | PacWest Bancorp vs. Comerica | PacWest Bancorp vs. First Horizon National |
| Western Alliance vs. Fifth Third Bancorp | Western Alliance vs. Zions Bancorporation | Western Alliance vs. Huntington Bancshares Incorporated | Western Alliance vs. PNC Financial Services |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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