Correlation Between Pacific Premier and Preferred Bank
Can any of the company-specific risk be diversified away by investing in both Pacific Premier and Preferred 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 Pacific Premier and Preferred Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pacific Premier Bancorp and Preferred Bank, you can compare the effects of market volatilities on Pacific Premier and Preferred 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 Pacific Premier with a short position of Preferred Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacific Premier and Preferred Bank.
Diversification Opportunities for Pacific Premier and Preferred Bank
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Pacific and Preferred is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Premier Bancorp and Preferred Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Preferred Bank and Pacific Premier 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 Pacific Premier Bancorp are associated (or correlated) with Preferred Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Preferred Bank has no effect on the direction of Pacific Premier i.e., Pacific Premier and Preferred Bank go up and down completely randomly.
Pair Corralation between Pacific Premier and Preferred Bank
Given the investment horizon of 90 days Pacific Premier is expected to generate 1.17 times less return on investment than Preferred Bank. In addition to that, Pacific Premier is 1.25 times more volatile than Preferred Bank. It trades about 0.06 of its total potential returns per unit of risk. Preferred Bank is currently generating about 0.1 per unit of volatility. If you would invest 6,927 in Preferred Bank on August 25, 2024 and sell it today you would earn a total of 2,640 from holding Preferred Bank or generate 38.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pacific Premier Bancorp vs. Preferred Bank
Performance |
| Timeline |
| Pacific Premier Bancorp |
| Preferred Bank |
Pacific Premier and Preferred Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pacific Premier and Preferred Bank
The main advantage of trading using opposite Pacific Premier and Preferred Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pacific Premier position performs unexpectedly, Preferred 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 Preferred Bank will offset losses from the drop in Preferred Bank's long position.| Pacific Premier vs. Community West Bancshares | Pacific Premier vs. Heritage Financial | Pacific Premier vs. First Financial Northwest | Pacific Premier vs. Sierra Bancorp |
| Preferred Bank vs. Pacific Premier Bancorp | Preferred Bank vs. Heritage Financial | Preferred Bank vs. QCR Holdings | Preferred Bank vs. Lakeland Financial |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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