Correlation Between Capitol Federal and Pacific Premier

Can any of the company-specific risk be diversified away by investing in both Capitol Federal and Pacific Premier 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 Capitol Federal and Pacific Premier into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Capitol Federal Financial and Pacific Premier Bancorp, you can compare the effects of market volatilities on Capitol Federal and Pacific Premier 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 Capitol Federal with a short position of Pacific Premier. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capitol Federal and Pacific Premier.

Diversification Opportunities for Capitol Federal and Pacific Premier

0.87

Correlation Coefficient

Capitol Federal  Pacific Premier

Very poor diversification

The 3 months correlation between Capitol and Pacific is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Capitol Federal Financial and Pacific Premier Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Premier Bancorp and Capitol Federal 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 Capitol Federal Financial are associated (or correlated) with Pacific Premier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Premier Bancorp has no effect on the direction of Capitol Federal i.e., Capitol Federal and Pacific Premier go up and down completely randomly.

Pair Corralation between Capitol Federal and Pacific Premier

Given the investment horizon of 90 days Capitol Federal Financial is expected to under-perform the Pacific Premier. But the stock apears to be less risky and, when comparing its historical volatility, Capitol Federal Financial is 1.28 times less risky than Pacific Premier. The stock trades about -0.45 of its potential returns per unit of risk. The Pacific Premier Bancorp is currently generating about -0.3 of returns per unit of risk over similar time horizon. If you would invest  2,769  in Pacific Premier Bancorp on October 5, 2024 and sell it today you would lose (318.00) from holding Pacific Premier Bancorp or give up 11.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Capitol Federal Financial  vs.  Pacific Premier Bancorp

Capitol Federal Financial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Capitol Federal Financial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Capitol Federal may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pacific Premier Bancorp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pacific Premier Bancorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental drivers, Pacific Premier is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Capitol Federal and Pacific Premier

The main advantage of trading using opposite Capitol Federal and Pacific Premier positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capitol Federal position performs unexpectedly, Pacific Premier 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 Pacific Premier will offset losses from the drop in Pacific Premier's long position.

The idea behind Capitol Federal Financial and Pacific Premier 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.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.