Correlation Between Pacific Premier and First Financial
Can any of the company-specific risk be diversified away by investing in both Pacific Premier and First Financial 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 First Financial 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 First Financial, you can compare the effects of market volatilities on Pacific Premier and First Financial 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 First Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacific Premier and First Financial.
Diversification Opportunities for Pacific Premier and First Financial
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Pacific and First is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Premier Bancorp and First Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Financial 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 First Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Financial has no effect on the direction of Pacific Premier i.e., Pacific Premier and First Financial go up and down completely randomly.
Pair Corralation between Pacific Premier and First Financial
Given the investment horizon of 90 days Pacific Premier is expected to generate 1.18 times less return on investment than First Financial. In addition to that, Pacific Premier is 1.11 times more volatile than First Financial. It trades about 0.17 of its total potential returns per unit of risk. First Financial is currently generating about 0.22 per unit of volatility. If you would invest 4,349 in First Financial on August 27, 2024 and sell it today you would earn a total of 675.00 from holding First Financial or generate 15.52% 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. First Financial
Performance |
| Timeline |
| Pacific Premier Bancorp |
| First Financial |
Pacific Premier and First Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pacific Premier and First Financial
The main advantage of trading using opposite Pacific Premier and First Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pacific Premier position performs unexpectedly, First Financial 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 First Financial will offset losses from the drop in First Financial'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 |
| First Financial vs. Chemung Financial Corp | First Financial vs. Citizens Northern Corp | First Financial vs. National Bankshares | First Financial vs. Fidelity DD 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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