Correlation Between Texas Capital and PacWest Bancorp
Can any of the company-specific risk be diversified away by investing in both Texas Capital and PacWest 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 Texas Capital and PacWest Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Texas Capital Bancshares and PacWest Bancorp, you can compare the effects of market volatilities on Texas Capital and PacWest 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 Texas Capital with a short position of PacWest Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Texas Capital and PacWest Bancorp.
Diversification Opportunities for Texas Capital and PacWest Bancorp
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Texas and PacWest is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Texas Capital Bancshares and PacWest Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PacWest Bancorp and Texas Capital 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 Texas Capital Bancshares are associated (or correlated) with PacWest Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PacWest Bancorp has no effect on the direction of Texas Capital i.e., Texas Capital and PacWest Bancorp go up and down completely randomly.
Pair Corralation between Texas Capital and PacWest Bancorp
Assuming the 90 days horizon Texas Capital is expected to generate 5.65 times less return on investment than PacWest Bancorp. But when comparing it to its historical volatility, Texas Capital Bancshares is 5.5 times less risky than PacWest Bancorp. It trades about 0.02 of its potential returns per unit of risk. PacWest Bancorp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,374 in PacWest Bancorp on August 29, 2024 and sell it today you would lose (904.00) from holding PacWest Bancorp or give up 38.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 28.08% |
| Values | Daily Returns |
Texas Capital Bancshares vs. PacWest Bancorp
Performance |
| Timeline |
| Texas Capital Bancshares |
| PacWest Bancorp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Texas Capital and PacWest Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Texas Capital and PacWest Bancorp
The main advantage of trading using opposite Texas Capital and PacWest Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Texas Capital position performs unexpectedly, PacWest 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 PacWest Bancorp will offset losses from the drop in PacWest Bancorp's long position.| Texas Capital vs. Washington Federal | Texas Capital vs. First Citizens BancShares | Texas Capital vs. Dime Community Bancshares | Texas Capital vs. Pinnacle Financial Partners |
| PacWest Bancorp vs. Western Alliance Bancorporation | PacWest Bancorp vs. Midland States Bancorp | PacWest Bancorp vs. Wintrust Financial Corp | PacWest Bancorp vs. Bank Ozk Preferred |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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